Petition for Writ of Certiorari — Raybestos Products Products Co Co. v. Indiana Department of Environmental Management (No. 09-11)

Supreme Court brief2009

Ask Donna

What actually matters in this document.

Text

\r No. 09-11 JUN 29 2009

PRICE OF TRE CLERK

Bn The

Supreme Court of the United States

RAYBESTOS PRODUCTS COMPANY,

Petitioner,

THE INDIANA DEPARTMENT OF

ENVIRONMENTAL MANAGEMENT,

Respondent.

On Petition For Writ Of Certiorari

To The Indiana Supreme Court

PETITION FOR WRIT OF CERTIORARI

GEORGE M. PLEWS

Counsel of Record

JEFFREY D. CLAFLIN

BRETT EF. NELSON

, PLEWS SHADLEY RACHER

& BRAUN LLP

1346 N. Delaware St.

Indianapolis, IN 46202

(317) 637-0700

COCKLE LAW BRIEF 1 RINTING CO (800) 225-6964

OR CALL. COLLECT (402) 342-2831

QUESTIONS PRESENTED FOR REVIEW

Where the state induces a private citizen to enter

into an agreed order in resolution of an environ-

mental enforcement action, to give up the right to

litigate the dispute, is the state’s subsequent refusal

to abide by the terms of that order a violation of the

citizen’s right to Due Process?

Where there is no effective mechanism for re-

dress for the state’s violation of the terms of an

agreed order, is that a violation of the citizen’s night

to Due Process and a taking under the Fifth and

Fourteenth Amendments to the Constitution of the

United States?

CORPORATE DISCLOSURE STATEMENT

No publicly traded company owns more than 10%

of Raybestos’ stock.

lll

TABLE OF CONTENTS

Page

QUESTIONS PRESENTED FOR REVIEW ......... i

CORPORATE DISCLOSURE STATEMENT ........ il

ROME COS GFGPEE ET Ee arse snes skciriccunsesciecmmanacencieys lil

TABLE OF AUTRES ERG vovessvsecesvennexsssnseversesseeis Vv

CITATIONS FOR OPINIONS BELOW. ................. 1

BASIS FOR JURISDICTION IN THIS COURT..... 1

CONSTITUTIONAL AND STATUTORY PROVI-

EPEC Oe Be ses chee issieet ssincaosesnainaantns 2

STAT ENEGEe COPE BiB Cilla ssecsencscctastcsixsssveniveces 2

REASONS FOR GRANTING CERTIORARI ........ 11

I. DUE PROCESS REQUIRES STRICT EN-

FORCEMENT OF THE AGREED ORDER... 11

II. DUE PROCESS REQUIRES A MEAN-

INGFUL OPPORTUNITY TO SEEK AN

BUE E BAS EV ES GURREEUED © os vsconscovecosnseseoesesenenns 17

Ill. IDEM’S DESTRUCTION OF THE AGREED

ORDER IS A “TAKING” FOR WHICH

RAYBESTOS IS ENTITLED TO COM-

PE NTE oscar cicsiesddaeness csantascas sania 24

APE RA PIED. sass ccsxsnsccinkcbsdeaiadninsanineneiniaasentaenenean 30

APPENDIX

Opinion of the Indiana Supreme Court on

transfer, filed December 9, 2008, reported at

897 W.E.Sel 460 Cra. DOG) gsc eccccsceccccucsoscsccsecs App. 1

TABLE OF CONTENTS -— Continued

Page

July 6, 2004 summary judgment order, Marion

County Superior Court (Cause No. 49D12-

GRIPES D vv cvis cccvescsscccnssercsccssacesesevoversne App. 18

Opinion of the Indiana Court of Appeals, filed

November 15, 2007, reported at 876 N.E.2d

TOW CEG, CE. BI, BRET sissisincsecssieceesccsesnassiens App. 25

October 30, 2006 Judgment Entry Regarding

Additional Damages and Attorney Fees,

Marion County Superior Court (Cause No.

49112-0209-PL-O001553) .......ccccccscccsssscccssereese App. 33

June 12, 2006 Judgment Entry, Marion County

Superior Court (Cause No. 49D12-0209-PL-

See CE BL ne nine etka App. 42

June 1, 2001 Order on Petition for Review

(Cause No. 49F12-0101-MI-00194) ............... App. 69

Opinion of the Indiana Supreme Court denying

rehearing, filed March 31, 2009, reported at

SOS IN.E.20 471 (ING. ZOOB) .......ccscsccosssessevcess App. 83

BO Ge Oi ia city ss essa cqcsrisenectn anes App. 85

FE A he ii sins ici thon shndsecineavecnrbasroanns App. 91

SO Te a iisdcrccdvinceptinseencctersanesens . App. 105

TE I We SE ic vainncaccancavresenrcicncamaeyeie App. 119

SO SO St BO visseiciccs i cco tnewurenchidesscmets App. 153

February 1997 Agreéd Order ......................2055 App. 154

TABLE OF AUTHORITIES

Page

CASES

Armstrong v. United States, 364 U.S. 40 (1960)...... 28, 29

Ash v. Chandler, 530 N.E.2d 303 (Ind. Ct. App.

MN scans a oes adap aieansca teases -onaunehnac bausanteincensnine ata

Burns v. City of Terre Haute, 744 N.E.2d 1038

MIE rks IN, PEE Fis evince siivnascicaseencessensenscers uae WS 27, 28

Campbell v. State, 284 N.E.2d 733 (1972)............... ey

Castle v. United States, 301 F.3d 1328 (Fed.

Re CN caches ob cane cesecaiekedatesxevcantialauacerieeeer inane 28

Entergy Arkansus, Inc. v. State of Nebraska,

226 F. Supp. 2d 1047 (D. Neb. 2002), aff’d,

SOE F.26 O20 (GER Cir, BODE) .....nccccccccocsecovcsescessereese 23

Franconia Associates v. United States, 536 U.S.

IN oo iad day ca tcese cotnsvaunndhassoueacasaniaiiersienzonees: 26

General Elec. Co. v. Johnson, 362 F. Supp. 2d

se ich acksve<vsncevcwssiwusieosiasbedsaresssleteein 22

Harmon Indus. v. Browner, 191 F.3d 894 (8th

pee WY posi isos oWccipad vine cick caccatndudseandidanioacaicerentsesnil 16

Horowitz v. United States, 267 U.S. 456 (1925)........ 27

Hughes v. United States, 342 U.S. 353

IN Se cca cacucsiasausesebatecaciaiaeseieeertietiaan eee 12, 13, 14

In re Estate of Moore, 714 N.E.2d 675 (Ind. Ct.

I MII 515 <5 755 fe cuvanuitsssVinuiacnasunn cacsemindoneraicasasiin: 26

Klamath Irrigation Dist. v. United States, 67

Fed. Cl. G06 (2008) ....0css00cc000.>. abceisilen Raisasd neds 26

iinet nana ahi ‘eile anon SOAP aim i "ane lili hen ae ie ‘ din asset rans

TABLE OF AUTHORITIES — Continued

Page

Logan v. Zimmerman Brush Co., 455 U.S. 422

il 17, 20

Lynch v. United States, 292 U.S. 571 (1934) ............. 26

Marbury v. Madison, 5 U.S. 187 (1808)............. eee. 24

McIntosh v. Melroe Co., a Div. of Clark Equip.

Co., Inc., 729 N.E.2d 972 (Ind. 2000) ...............ss000 23

McKesson Corp. v. Div. of Alcoholic Beverages

& Tobacco, 496 U.S. 18 (1990)...............ccescceeees 21, 22

Palazzolo v. Rhode Island, 533 U.S. 606 (2001)........ 25

State ex rel. Reichert v. Youngblood, 73 N.E.2d

I dae aso csckcnshaenadovonsavaaetavetwons 23

United States v. Atlantic Refining Co., 360 U.S.

eae dedasikaaraca ay cuskhanasanesevenaxtaaeles canes 13, 14

United States v. Armour & Co., 402 U.S. 673

a ae sssadackaantoasiveninans 12,13, 14

United States v. ITT Continental Baking Co.,

I SIE © I cons ca sasnv quxevaxenvusradsounseuyunvsvdassnece 12

United States v. Smith, 94 U.S. 214 (1876) ........0...... 26

United States v. Winstar Corp., 518 U.S. 839

ST ost cccatctsdecyciawerauesshuvexiyiisatescepeussucvecvinuen 26, 27

CONSTITUTIONAL PROVISIONS AND STATUTES

ee es ccwcusasnevndieseadycduseasen 2, 25, 28

RJ te. CEG, MUOEIE, FALY, © Bh vccccccscscacsvccersccscncces 2.17, 25

IE IED o ccnvanaas sinceukacsncssashravelevarnassoasseoeecariie 1

vil

TABLE OF AUTHORITIES — Continued

Page

Oe Be a, ee I iinisinttetescacaee rattan eae 20

ie es ID aoiccusctsesondsenebconavinccnssvderssdeesnnain 16

SE 0 Oe MD 0s ccccachaxtininnouenegetonsbedeacetseracnaus 19

BO, Se Ge i viii sivcicenievsentervacntccsnneens 2, 9, 19, 27

EG CN © BB i vvsssvievvvesinccsssvenssnsceisovsssevecenrsas 2,19

Fa, Co Oe vicki sce ncceciccovnesconsvsspcavcseveonsses 2,19

eee en a U.... .. sac vapcosevedcctexseneuasvaaaeeen 2, 49

RO, Te Oe I oviinrsenicssscnnssccendsticdevitianesens 2,19

Bs AY Or TOI as cas ccv'nscavnonsscecedaacseusebnbnbeacdasnns 2,19

eee Ce oe PE wg. suena ontiacusbanesennecespanianeuseden 2

pT ee eS eS Cs Se eee 2,10, 23, 25, 27

CITATIONS FOR OPINIONS BELOW

Petitioner Raybestos Products Company (“Ray-

bestos”) seeks review of the Opinion of the Indiana

Supreme Court (App. 1-17) reported at 897 N.E.2d 469

(Ind. 2008). The Indiana Supreme Court denied Ray-

bestos’ petition for rehearing, except for the limited

purpose of correcting a minor error in the opinion im-

material to this petition. The Indiana Supreme Court’s

opinion on rehearing (App. 83-84) is reported at 903

N.E.2d 471 (Ind. 2009). The Indiana Court of Appeals’

opinion reversing the trial court’s judgment in favor of

Raybestos (App. 25-32) is reported at 876 N.E.2d 759

(Ind. Ct. App. 2007). The trial court’s judgment en-

tries (App. 33-68) and the trial court’s order on peti-

tion for review (App. 69-82) were not reported, but

are included in the appendix to this petition.

BASIS FOR JURISDICTION IN THIS COURT

The Indiana Supreme Court issued its Opinion

on December 9, 2008 directing the trial court to

vacate judgments in favor of petitioner Raybestos and

to dismiss the action. Raybestos timely filed a peti-

tion for rehearing on January 8, 2009. The Indiana

Supreme Court substantively denied Raybestos’ peti-

tion for rehearing on March 31, 2009. This Court has

jurisdiction, pursuant to 28 U.S.C. §1257(a), to review

the final judgment of the highest court of a state upon

a petition for writ of certiorari.

ae Bat

note

en 2 Se i i NI oe Sina eT ee ae ‘ omtttege!S “a, aa Oe a ——

CONSTITUTIONAL AND

STATUTORY PROVISIONS AT ISSUE

No person shall be held to answer for a capi-

tal, or otherwise infamous crime, unless on a

presentment or indictment of a grand jury,

except in cases arising in the land or naval

forces, or in the militia, when in actual ser-

vice in time of war or public danger; nor

shall any person be subject for the same

offense to be twice put in jeopardy of life or

limb; nor shall be compelled in any criminal

case to be a witness against himself, nor be

deprived of life, liberty, or property, without

due process of law; nor shall private property

be taken for public use, without just com-

pensation.

U.S. Const. amend. V.

No State shall ... deprive any person of life,

liberty, or property, without due process of

law....

U.S. Const. amend. XIV, § 1.

Ind. Code §§ 4-21.5-2-5, 4-21.5-3-4, 4-21.5-3-5, 4-21.5-

3-6, 4-21.5-3-8, 4-21.5-5, 13-25-4, 34-13-1-1.

STATEMENT OF THE CASE

This case raises the question of whether there is

any effective remedy for Indiana citizens when the

state environmental agency, the Indiana Department

of Environmental Management (“IDEM”), subverts

an agreement it enters regarding the investigation

and remediation of environmental contamination.

IDEM changed its mind about the agreement it had

made and — unwilling to seek change through the

agreement’s dispute resolution mechanism — set

about inducing a reluctant. EPA to force Raybestos to

perform a cleanup different than the risk-based

cleanup required by the agreement that IDEM and

Raybestos previously negotiated. This case does not

involve “overfiling” by the United States Environmen-

tal Protection Agency (“EPA”) as a result of routine

communications with IDEM or EPA’s own, indepen-

dent determination that the outcome of the state

agreement would be inadequate. The Indiana Su-

preme Court’s 2008 opinion leaves Raybestos and

other Indiana citizens with no opportunity for redress

when IDEM determines to renege on its agreements.

This case began in February 1997, with an

Agreed Order settling a dispute between Raybestos

and IDEM. The dispute concerned whether, and to

what extent, Raybestos was responsible for the clean-

up of polychlorinated biphenyls (“PCBs”) in a drain-

age ditch (known as “Shelly Ditch”) near Raybestos’

Crawfordsville, Indiana plant. Raybestos did not

agree it was solely or even partially responsible, but

in order to avoid a lengthy dispute Raybestos entered

into an Agreed Order with IDEM by which Raybestos

agreed to perform a “risk-based” remediation. A risk-

based cleanup’s essential characteristic is that the

cleanup is not to a pre-set or arbitrary level of clean-

up, but to a level consistent with the actual risk

presented by the contaminant at the particular

cleanup site. The Agreed Order included a dispute

resolution mechanism. (App. 172-74.)

Raybestos submitted its risk assessment. After

fifteen months of review and analysis by IDEM and

its EPA-approved outside risk-assessment contractor,

IDEM approved Raybestos’ risk assessment. (App. 48,

413.) Raybestos then prepared a technical memo-

randum incorporating the findings of the risk assess-

ment. (/d., 14.) IDEM provided comments in response

and suggested a “hot spot” removal. (/d.) Pursuant to

IDEM’s suggestion and a potential cleanup level set

forth in the approved risk assessment, Raybestos

then proposed a “hot spot” cleanup to remove all

PCBs to a maximum remaining concentration of 238

parts per million (“ppm”) in the worst areas (lower

levels of PCBs would remain in all other areas). (/d.)

However, IDEM’s administration changed and IDEM

abruptly “withdrew” its risk assessment approval and

disapproved Raybestos’ technical memorandum. (App.

19-20, 48, 714, 71-72.)

After providing IDEM with the required notice of

dispute under the Agreed Order’s dispute resolution

procedures, Raybestos filed a petition for admini-

strative review and, thereafter, its petition for judicial

review in the Marion Superior Court. (/d., 72-74.) On

judicial review, the state court judge found that

IDEM’s withdrawal of the approval of the risk assess-

ment and disapproval of the subsequent technical

memorandum was arbitrary and capricious, unsup-

ported by substantial evidence and had nothing to do

with the specifics of the risk assessment or any site-

specific evidence. (/d., 79.) Instead, the withdrawal

was based upon a single consideration: IDEM did not

want to set a “precedent” by allowing the “hot spot”

level proposed by Raybestos. (/d.) On June 1, 2001,

the state court held that Raybestos had been

prejudiced by IDEM’s breaches of the Agreed Order

and ordered that IDEM reinstate approval of the risk

assessment and approve the technical memorandum.

(/d., 81.) After Raybestos obtained an additional order

compelling IDEM to act, IDEM ultimately sent a

letter purporting to approve the technical memoran-

dum and reinstate approval of the technical memo-

randum. (/d., 59, 461-62.) However, IDEM refused

to allow the cleanup it had agreed to under the

Agreed Order.

IDEM did not appeal the trial court’s order. (/d.,

5.) Instead, throughout the dispute resolution, admin-

istrative and judicial review processes, IDEM had

mounted a planned, persistent campaign to use EPA

to force a different cleanup. Ultimately, EPA proceed-

ed to do just that, issuing a December 6, 2000 unilat-

eral administrative order (*UAO”) forcing Raybestos —

through the threat of punitive damages in an amount

up to three times the actual cleanup costs (State Ct.

App. 4070 (UAO penalty provision)) — to conduct a

cleanup to a uniform, arbitrary standard (10 ppm)

that ultimately cost over $16 million more than the

cleanup IDEM and Raybestos agreed to under the

Agreed Order.

Raybestos filed suit against IDEM in Marion Su-

perior Court on July 26, 2002, seeking damages for

IDEM’s breach of contract and declaratory relief

regarding IDEM’s liability for Raybestos’ future dam-

ages. (App. 5, 42.) On July 6, 2004, the trial court,

Honorable Robyn Moberly, granted, in part, Raybestos’

motion for summary judgment. Judge Moberly held

that the Agreed Order was a settlement agreement —

a contract — and that IDEM’s requests for EPA inter-

vention to subvert the risk-based process IDEM had

agreed to were a breach of contract. Ud., 21, 23.) The

trial court considered IDEM’s statutory and program

obligations to communicate with EPA, but found that

its actions in this case were not ordinary-course com-

munications required by National Contingency Plan

(“NCP”), the Superfund Memorandum of Agreement

(“SMOA”) between IDEM and EPA, or other law. Ud.,

22.) Instead, it was uncontested that IDEM’s commu-

nications with EPA were “to avoid the terms of the

Agreed Order, which were binding on [IDEM].” (d.,

23.) The trial court reserved for trial the questions of

causation and damages. (Id.)

Following a six-day bench trial (id., 44), on June

12, 2006, the trial court entered judgment in favor of

Raybestos in the amount of $11,645,321.58, plus post-

judgment interest. (/d., 66-67.) At tmal, [IDEM

presented evidence that it claimed showed that EPA’s

enforcement action resulted from IDEM’s “legitimate”

communications with EPA, including communications

under the SMOA, rather than “illegitimate” commu-

nications intended to avoid [DEM’s obligations under

the Agreed Order. (/d., 59, (65; State Ct. App. 3096-

3102.) The trial court weighed this evidence and

found that “IDEM’s communications to EPA regard-

ing Shelly Ditch were not done in the ordinary course

of business.” (U/d., 59, 763.)

The trial court made numerous well supported

factual findings on this issue. “IDEM was actively

soliciting, encouraging and insisting on EPA involve-

ment in the cleanup of the Raybestos/Shelly Ditch

site.” (id., 56, 947.) “IDEM mounted a planned,

organized, persistent campaign to use EPA to force a

different cleanup.” (/d., 59, 463.) “The EPA’s en-

forcement action was not due to possible NPL

(“National Priorities List”] listing of the Sugar Creek

Sediment Site or any pre-breach communication

by IDEM” (/d., 964.) “IDEM argued that ... [its]

“legitimate” communication could have caused EPA

enforcement.... However, there is no _ evidence

supporting this speculation.” Ud., 65.)

“Independent action by EPA — that is, action not

related to IDEM’s improper solicitations —. . . was not

a substantial factor in EPA’s involvement in the

Shelly Ditch cleanup.” (/d., 60, 167.)

Although it is unknowable whether the EPA

would have ever involved itself in the Shelly

Ditch clean up, the evidence is voluminous

and overwhelming that EPA would not have

gotten involved in the clean up when it did or

any time in the foreseeable future, but for

the efforts of IDEM.

Ud., 56-57, 947.) “There were reasons that the EPA

could have or might have eventually initiated enforce-

ment actions against the Plaintiff, but the Court is

unconvinced that there was any other factor in the

EPA’s involvement other than the persistent insis-

tence of IDEM.” Ud., 59, 62.)

Raybestos was aware that EPA had the right

to over-file to compel a more stringent clean-

up than that proposed by Raybestos. Raybestos

accepted the “risk” that the EPA would over-

file when it signed the Agreed Order with

IDEM. However, Raybestos did not accept

the “risk” that IDEM would instigate, en-

courage, facilitate and insist upon the EPA

over-filing.

(Id., 54, 137.) Not one of these findings was reversed

or even criticized on appeal.

Evidence related to Raybestos’ post-September

20, 2003 damages and Raybestos’ attorney fees was

presented on September 8, 2006. (/d., 33-34.) The trial

court’s October 30, 2006 judgment awarded Raybestos

an additional $4,716,691.33. ([d., 40.) IDEM appealed.

On November 15, 2007 the Indiana Court of

Appeals issued a seven-page order reversing the trial

court’s 2004 grant of summary judgment on the issue

of IDEM’s breach of the Agreed Order. The court

addressed almost none of the issues briefed by the

parties. Its sole basis for reversal was a holding that

IDEM lacked authority to approve Raybestos’ cleanup

and the Agreed Order was unenforceable as a matter

of public policy. IDEM had never made this claim.

Raybestos petitioned for, and obtained, transfer to the

Indiana Supreme Court, vacating the Court of

Appeals’ opinion.

In its December 9, 2008 opinion, the Indiana

Supreme Court found that IDEM actually did have

authority to enter into risk-based cleanups and held

that the Agreed Order “is an agency action governed

by [the Indiana Administrative Orders and Proce-

dures Act (“AOPA”)], not a contract that will support

a claim for damages from IDEM.” (App. 1.) Essential

to its holding was the finding that “IDEM’s com-

munications with EPA are agency actions” subject to

exclusive review under AOPA, which does not autho-

rize money damages. (App. 10-11.) The Indiana Su-

preme Court noted that not all contract claims against

state agencies for money damages are precluded by

AOPA, citing an AOPA exemption for “contracts for

the acquisition, leasing or disposition of property or

the procurement of goods or services.” (/d., 12.) But

the court ignored that other actions are exempt from

AOPA, including “decision|s] to initiate or not to

initiate an inspection, investigation, or other similar

inquir[ies] that will be conducted by the agency [or]

another agency” and “decision[s] concerning the con-

duct of an inspection, investigation, or other similar

inquiries.” Ind. Code §§ 4-21.5-2-5(9) & (10). IDEM’s

extraordinary efforts to induce the EPA to destroy the

Agreed Order by instituting a second enforcement

action fall within the plain language of these AOPA

exemptions.

As noted by the Indiana Supreme Court, IDEM

first argued that AOPA precluded Raybestos’ claim for

_ contract damages in its brief to the Indiana Court of

Appeals. (App. 9.) However, IDEM’s argument to the

Indiana Court of Appeals was that the Agreed Order

itself was an “agency action” and that Raybestos was

required to seek judicial review or enforcement of the

Agreed Order through AOPA. (Appellant’s Br. at 20-

21.) IDEM argued that Indiana courts are deprived of

jurisdiction “when a party has an administrative rem-

edy and fails to exhaust it.” (d., 21.) In response,

Raybestos noted in its Appellee’s brief that it had

sought judicial review and enforcement of the Agreed

Order, had obtained the only relief possible under

AOPA, had exhausted its administrative remedies

and was now seeking damages, not judicial review.

(Appellee’s Br. at 26-28.) IDEM never argued that its

communications with EPA in an effort to subvert the

Agreed order were “agency actions” or that AOPA

precluded a damage claim under the Indiana statute

permitting such claims against the state.

The first suggestion that Raybestos had no pos-

sible remedy for IDEM’s subversion of the Agreed

Order was Indiana Supreme Court’s December Q,

2008 order. That order confirmed that AOPA did not

permit the award of money damages but also held

that AOPA precluded Raybestos’ claim under I.C.

§ 34-13-1-1(a), which permits contract claims against

the state. Raybestos’ first opportunity to address the

assertion that Indiana law deprived it of any effective

remedy at all was with its petition for rehearing.

Raybestos briefed the due process issues addressed

in this petition in its petition for rehearing. (Pet.

Reh’g at 9-13.) The Indiana Supreme Court denied

Raybestos’ petition for rehearing, other than to cor-

rect that court’s misstatement regarding the stan-

dards applicable to administrative review.

REASONS FOR GRANTING CERTIORARI

I. DUE PROCESS REQUIRES STRICT EN-

FORCEMENT OF THE AGREED ORDER.

This Court has held that agreed orders or con-

sent decrees between a state and a private citizen

must be strictly and literally enforced, as written,

because, by entering such orders or decrees, the

citizen is giving up the fundamental due process right

to litigate the dispute:

Consent decrees are entered into by parties

to a case after careful negotiation has

produced agreement on their precise terms.

The parties waive their right to litigate the

issues involved in the case and thus save

themselves the time, expense, and inevitable

risk of litigation. Naturally, the agreement

reached normally embodies a compromise; in

exchange for the saving of cost and elimi-

nation of risk, the parties each give up

something they might have won had they

proceeded with the litigation. Thus the de-

cree itself cannot be said to have a purpose;

rather the parties have purposes, generally

opposed to each other, and the resultant de-

cree embodies as much of those opposing

purposes as the respective parties have the

bargaining power and skill to achieve. For

these reasons, the scope of a consent decree

must be discerned within its four corners,

and not by reference to what might satisfy

the purposes of one of the parties to it.

Because the defendant has, by the decree,

waived his right to litigate the issues raised,

a right guaranteed to him by the Due Process

Clause, the conditions upon which he has

given that waiver must be respected, and the

instrument must be construed as it is written,

and not as it might have been written had the

plaintiff established his factual claims and

legal theories in litigation. (Emphasis added;

footnote omitted.)

United States v. Armour & Co., 402 U.S. 673, 681-82

(1971); United States v. ITT Continental Baking Co.,

420 U.S. 223, 245 (1975).

The Armour Court cited Hughes v. United States,

342 U.S. 353 (1952), a case where “the Government

sought to construe a consent decree that gave the

defendant the option of selling his stock or putting it

in a voting trust as requiring him to sell the stock

within a reasonable time even though he chose the

voting trust alternative, because the procompetitive

purpose of the decree would otherwise be frustrated.”

Armour, 402 U.S. at 682.

It may be true as the Government now con-

tends that Hughes’ large block of ownership

in both types of companies endangers the

independence of each. Evidence might show

that the sale by Hughes is indispensable

if competition is to be preserved. However,

in section V the parties and the District

Court provided their own detailed plan to

neutralize the evils from such ownership.

Whatever justification there may be now or

hereafter for new terms that require a sale of

Hughes’ stock we think there is no fair

support for reading that requirement into

the language of section V.

Armour, 402 U.S. at 682 (quoting Hughes, 342 U.S. at

357); see also United States v. Atlantic Refining Co.,

360 U.S. 19 (1959).

As was noted in the statement of the case, under

the terms of the Agreed Order and the Scope of

Work (“SOW”) incorporated therein (App. 161, (28),

Raybestos was to undertake a risk-based cleanup of

the site. The cleanup would be governed by a tech-

nical memorandum incorporating the findings of the

risk assessment. (/d., 196-97.) It was intended to be a

fully comprehensive cleanup, “to address human

health and environmental concerns and bring the site

to closure such that no further actions [would be] re-

quired.” (/d., 184.) Throughout this process,

Raybestos worked closely with IDEM and its EPA-

approved risk assessment contractor. [DEM proposed

the “hot spot” removal. Raybestos then submitted the

technical memorandum incorporating the hot spot

removal, including a cleanup removing all PCBs to a

maximum remaining concentration of 238 parts per

million in the worst areas. But then, IDEM’s

administration changed and it abruptly “withdrew” its

risk assessment approval and disapproved Raybestos’

technical memorandum. (App. 19-20, 48, 414, 71-72.)

On judicial review, the trial court held that the

agency’s withdrawal of the risk assessment and the

disapproval of the technical memorandum was arbi-

trary and capricious. The judge ordered IDEM to

reinstate the risk assessment and to approve the

technical memorandum. IDEM did not appeal the

ruling of the trial court. The agency was, at that

point, bound by the Agreed Order, as enforced by a

trial court judge, to allow Raybestos to proceed with

the hot spot cleanup mandated by the technical mem-

orandum. Unwilling, though, to abide by the Agreed

Order and its dispute resolution process, IDEM

already had concluded a successful secret campaign

to convince EPA that it should step in to compel

Raybestos to conduct a different and much more

expensive cleanup than what was otherwise required

under the Agreed Order. IDEM intentionally disre-

spected and disregarded the fundamental condition

upon which Raybestos entered the Agreed Order —

that there would be a risk-based cleanup governed by

the results of the risk assessment — when it enlisted

EPA to do what it then could not. Raybestos gave up

its due process right to litigate its dispute with IDEM

over responsibility for the cleanup of the alleged

contamination in exchange for such a non-arbitrary,

actual risk-based cleanup. Under Armour, Hughes,

and Atlantic Refining, it does not matter that the

government later decided that the Agreed Order

should be abandoned, even if that decision was argu-

ably based on valid policy considerations. Due process

required IDEM to abide by its agreement.

The Indiana Supreme Court dismissed this ar-

gument, finding that there was no promise in the

Agreed Order that IDEM would not contact EPA, that

EPA “overfilling” was a known risk that IDEM could

not foreclose by its agreement with Raybestos, that

there are “federal regulations requiring communica-

tion between the agencies,” that the Agreed Order, “in

the event of a conflict in the application of Federal,

state or local laws,” compels Raybestos to comply with

the most stringent standards, and that IDEM had, in

any event, reserved all “rights and defenses” in the

Agreed Order. (App. 15-17.)

However, IDEM’s promise, and its waiver of its

“right” to beg EPA to intervene, was the Agreed Order

itself. IDEM committed to a course of action, to

“suspend its own enforcement efforts” (id., 17), which

included contacting EPA to demand a separate en-

forcement action in spite of the Agreed Order. IDEM’s

precise promise was expressly stated in paragraph 84

of the Agreed Order: “(nJothing in this order shall

restrict the State of Indiana from seeking other

appropriate relief to protect human health or the

environment from pollution or contamination at or

from this site not addressed in this Order.” (Id., 181,

784.) (Emphasis added.) IDEM asked EPA to inter-

vene in precisely the same site and the same alleged

contamination covered by the Agreed Order. There

could not be a clearer breach of IDEM’s obligations

under the Agreed Order.

Likewise, the Agreed Order was IDEM’s commit-

ment in writing to a risk-based cleanup rather than

the arbitrary numerical standards ultimately im-

posed under EPA’s unilateral order. There was no

“conflict” with a more stringent law; EPA’s regula-

tions expressly allow such risk-based PCB cleanups.

(App. 31 (citing 40 C.F.R. § 761.120(c)).) This was no

overfiling in the normal sense, where EPA is con-

cerned with state action or inaction and the efficacy

of a proposed cleanup. See Harmon Indus. v. Browner,

191 F.3d 894 (8th Cir. 1999) (EPA initiated enforce-

ment action seeking to impose a penalty for the same

alleged violations that state agency and regulated

entity addressed through a consent order which

imposed no penalty.). EPA was not concerned with the

Shelly Ditch cleanup until IDEM induced it to get

involved; the Indiana Supreme Court accepted the

trial court’s factual finding that “EPA would not have

acted absent IDEM’s prodding.” (Jd., 15.) Finally, the

federal regulations cited by the Indiana Supreme

Court requiring communication between the agencies

(td., 16) have nothing to do with specific enforcement

actions or this case. “IDEM’s communications to EPA

regarding Shelly Ditch were not done in the ordinary

course of business. IDEM mounted a planned, or-

ganized, persistent campaign to use EPA to force a

different cleanup.” (/d., 59 463.)

Both parties gave up rights in the Agreed Order.

The general reservation of rights clause is limited by

IDEM’s specific agreement to a risk-based, compre-

hensive cleanup and by its agreement to resolve any

disputes through the dispute resolution mechanism of

the Agreed Order. Raybestos gave up its right to

litigate its dispute with IDEM when it entered into

the Agreed Order. Raybestos was obligated to abide

by the terms and conditions of that order; so was

IDEM.

Indiana law provides a mechanism — a contract

claim against the state — to protect citizens like Ray-

bestos from deprivation of the property right to en-

force a consent decree. The Indiana Supreme Court’s

eleventh-hour determination that this mechanism

was not available leaves Raybestos and other Indiana

citizens without any potential remedy for the state’s

deprivation of this property right, in violation of their

due process rights under the Fourteenth Amendment.

Il. DUE PROCESS REQUIRES A MEANING-

FUL OPPORTUNITY TO SEEK AN EFFEC-

TIVE REMEDY.

The Fourteenth Amendment requires “an oppor-

tunity ... granted at a meaningful time and in a

meaningful manner for a hearing appropriate to the

nature of the case.” Logan v. Zimmerman Brush Co.,

455 U.S. 422, 437 (1982). Here, Raybestos had no

meaningful opportunity to challenge IDEM’s actions

through AOPA, and — according to the Indiana Su-

preme Court — may not challenge IDEM’s actions

through a claim for contract damages. If the Indiana

Supreme Court’s decision stands, there will be no

opportunity for any Indiana citizen to challenge

IDEM’s efforts to make performance of the agree-

ments it enters impossible.

The Indiana Supreme Court held that “IDEM’s

communications with EPA [are] agency action(s)” and

that Raybestos’ “claim is for failure to carry out an

obligation under the Order not to communicate with

EPA,” and is thus a “failure to perform a duty,

function or activity under [AOPA].” (App. 10.) It held

that “pursuant to AOPA, exclusive jurisdiction to

review the Agreed Order and IDEM’s obligations and

functions under the order lies in the administrative

procedure provided by [AOPA].” (d., 11.)

However, Raybestos was not able to seek redress

through AOPA for IDEM’s efforts to subvert the

Agreed Order through extraordinary communications

to EPA because those communications were secret.

IDEM did not provide notice to Raybestos that, for

example, it prepared and internally distributed a

September 22, 1998 memorandum outlining how it

would involve EPA to defeat the Agreed Order (App.

50, 421) or that its Assistant Commissioner was

asking EPA to take over the Shelly Ditch enforcement

effort “on a weekly basis.” (App. 56, 446). If these and

other IDEM acts to destroy the Agreed Order were

actually “agency actions” for which review was avail-

able under AOPA, IDEM would have been required to

provide Raybestos with written notice describing the

agency action and explaining the available proce-

dures and time limits for administrative review. See

I.C. §§ 4-21.5-3-4, 4-21.5-3-5, 4-21.5-3-6, and 4-21.5-3-

8 (requiring, inter alia, notice of “orders” which

include “agency actions” that determine “the legal

rights, duties ... or other legal interests” of a per-

son.)'

Even had IDEM provided notice to Raybestos of

its illicit actions, a “claim against the State or its

agency for damages is not among the available

remedies” under AOPA. (App. 11.)° The only remedies

available under AOPA are for the trial court to “re-

mand the case to the agency for further proceedings”

or to “compel agency action that has been unrea-

sonably delayed or unlawfully withheld.” I.C. § 4-

21.5-5-15. This is the same relief Raybestos sought —

and obtained — when it challenged IDEM’s “with-

drawal” of its approval of the risk assessment and

disapproval of its technical memorandum. Of course,

by the time Raybestos obtained the relief available

under AOPA, IDEM had successfully destroyed the

Agreed Order by inducing EPA to begin a separate

enforcement action. IDEM refused to make any

' See 1.C. § 4-21.5-1-9 (defining “order”).

* Raybestos could not have obtained review of IDEM’s

actions under AOPA in any event. IDEM’s extraordinary efforts

to evade its own Agreed Order are expressly exempted from

AOPA as “decision|s] to initiate or not to initiate an inspection,

investigation, or other similar inquir|ies| that will be conducted

by the agency [or) another agency” and “decision|s] concerning

the conduct of an inspection, investigation, or other similar

inquiries.” I.C,. §§ 4-21.5-2-5(9) & (10). The Indiana Supreme

Court did not address these exemptions.

efforts to regain control of the cleanup following

Judge Keele’s order on Raybestos’ petition for review.

(State Ct. App. 4099-4103 (Raybestos’ October 26,

2001 letter requesting that IDEM petition EPA to

reinstate IDEM as the “lead agency” directing the

Shelly Ditch cleanup and IDEM’s November 6, 2001

letter declining to do so.).)

That Raybestos ultimately successfully obtained

judicial review of IDEM’s improper “withdrawal” of

the risk-assessment approval is no substitute for a

meaningful remedy for IDEM’s breaches of the

Agreed Order. “(T]he Fourteenth Amendment [re-

quires] an opportunity ... granted at a meaningful

time and in a meaningful manner for a hearing

appropriate to the nature of the case.” Logan, 455

U.S. at 437. IDEM’s letter “agreeing” (after being

compelled to do so) to “reinstate” Raybestos’ risk

assessment and approve Raybestos’ technical memo-

randum was meaningless because IDEM already had

made cleanup under the Agreed Order impossible. By

December 2000, before the close of judicial review,

EPA had already issued its order requiring Raybestos

to clean up to a much more stringent level, under

threat of treble damages. (App. 5.) See also 42 U.S.C.

§ 9607(c\3) (authorizing “punitive damages in an

amount at least equal to, and not more than three

times, the amount of any costs incurred by the Fund

as a result of such failure to take proper action”).

The Indiana Supreme Court also held that

“IDEM’s communications with EPA are ‘agency ac-

tions’” subject to exclusive review under AOPA and

that, unlike a claim for breach of a contract “for the

acquisition, leasing or disposition of property or the

procurement of goods or services,” no exemption per-

mits a claim under the statute that permits contract

claims against the state. (App. 10-13.) If the Indiana

Supreme Court’s order stands, then Indiana’s statutes

deprive Raybestos — and the many other citizens’ who

enter agreed orders with IDEM — from any means to

challenge IDEM when it reneges on its agreements.

IDEM can make and break such agreements with

impunity and Raybestos and other Indiana citizens

will have no process at all; no opportunity to be heard,

no remedy. The regulated community will surely be

discouraged from making agreements that cannot be

enforced.

There is, of course, a better answer. The avail-

ability of a post-deprivation claim for contract dam-

ages comports with due process by providing a

meaningful opportunity for post-implementation re-

view and redress. See McKesson Corp. v. Div. of

Alcoholic Beverages & Tobacco, 496 U.S. 18, 38 (1990)

(where only remedy for unlawful tax is post-

deprivation challenge to the collection of the tax, due

process requires that “the State must provide tax-

payers with not only a fair opportunity to challenge

the accuracy and legal validity of their tax obliga-

tions, but also a clear and certain remedy.”). This

* IDEM represented to the Indiana courts that it enters into

such agreed orders “on a daily basis.” (See IDEM’s December 18,

2006 Appellant’s Supplemental Case Summary at 3).

Court explained that in tax cases, the “taxpayer pay

under duress when he proffers a timely payment

merely to avoid a serious disadvantage in the asser-

tion of his legal rights should he withhold payment

and await a state enforcement proceeding,” and that

this is further cause for there having to be an ade-

quate post-deprivation remedy.” /d., 38 n.21. There is

no difference betwen the taxpayer paying under

duress and the person or company being regulated

by any other administrative agency, where the full

weight of the government and the threat of escalating

enforcement actions similarly can be brought to bear.

Post-enforcement review is familiar in the envi-

ronmental context. Many defendants in Comprehensive

Environmental Response, Compensation and Liability

Act (“CERCLA”) enforcement actions have challenged

the constitutionality of § 106 of that statute because

it does not provide for any pre-enforcement review of

EPA’s actions. Courts addressing these clairas have

upheld the constitutionality of § 106, but only because

the statute explicitly requires judicial review prior to

the actual deprivation of a property interest. E.g.,

General Elec. Co. v. Johnson, 362 F. Supp. 2d 327, 339

(D.D.C. 2005) (“The ability of the PRP to choose,

under the language of the statute, whether to comply

with a section 106 order is key. .. . [Wlere the [poten-

tially responsible party] to be deprived of any mean-

ingful choice to refuse to comply with an order, that

might pose a different situation in assessing whether

a deprivation of property has occurred.”).

Here, Raybestos was completely deprived of any

pre-enforcement or post-enforcement remedy. IDEM

failed to provide notice of its improper communica-

tions with EPA and the Indiana Supreme Court held

that the trial court did not have jurisdiction to hear

Raybestos’ claim. The only remedy that Raybestos

was left with — specific performance of the Agreed

Order — was no longer available. Raybestos thus

never had a chance to challenge the agency’s action,

either before or after it was deprived of its property

interest. Because Raybestos could not challenge

IDEM’s destruction of the Agreed Order through

AOPA or insist upon specific performance where per-

formance was made impossible by IDEM, a claim for

damages is the only remaining remedy. Such a

remedy is provided for in Indiana’s Contract Claim

Statute, I.C. § 34-13-1-1(a). Effective damage reme-

dies for governmental undermining of the agreements

it makes are vital to keeping government conduct

within lawful bounds. Entergy Arkansas, Inc. v. State

of Nebraska, 226 F. Supp. 2d 1047, 1161 (D. Neb.

2002), aff’d, 358 F.3d 528 (8th Cir. 2004).

The right to a remedy is a basic tenet of law in a

just society. Its roots can be found in the Magna

Carta: “To no one will we sell, to no one will we deny,

or delay right or justice.” McIntosh v. Melroe Co., a

Div. of Clark Equip. Co., Inc., 729 N.E.2d 972, 987

(Ind. 2000). Under Indiana law, “[i]Jt has always been

a general principle under our legal system that for

every wrong there should be a remedy.” State ex rel.

Reichert v. Youngblood, 73 N.E.2d 174, 179 (Ind.

1947). “The very essence of civil liberty certainly

consists in the right of every individual to claim the

protection of the laws, whenever he receives an

injury. One of the first duties of government is to

afford that protection.” Marbury v. Madison, 5 U.S.

137, 163 (1803).

Ill. IDEM’S DESTRUCTION OF THE AGREED

ORDER IS A “TAKING” FOR WHICH RAY-

BESTOS IS ENTITLED TO COMPENSA-

TION.

Raybestos’ theory of the case in the lower courts

was based on IDEM’s breach of contract. After a six

day bench trial, the trial court found that EPA would

not have initiated an enforcement action against

Raybestos but for IDEM’s extraordinary and unlawful

effort to compel the federal agency to intervene, and

that IDEM’s action were, thus, a breach of the Agreed

Order, a breach entitling Raybestos to millions of

dollars in damages.

The Indiana Supreme Court did not hold that the

Agreed Order was not a contract or that IDEM did

not breach the contract, only that the Agreed Order

was “not a contract that will support a claim for

damages from IDEM.” (App. 1.) The Court reasoned

that this was so because Rayhestos’ exclusive remedy

was under AOPA, which does not provide for the

recovery of damages, and because the state statute

allowing for breach of contract actions against the

state did not apply because the Agreed Order was not

a contract for goods or services.*

If the Indiana Supreme Court’s Opinion is

allowed to stand, then Raybestos will have suffered a

breach of contract at the hands of a state agency, one

costing Raybestos millions of dollars, for which there

is no remedy whatsoever. The combination of these

actions has resulted in a taking of Raybestos’ prop-

erty by the State of Indiana in contravention of the

Fifth and Fourteenth Amendments to the Constitu-

tion of the United States, a taking that entitles

Raybestos either to “just compensation,” if not con-

tract damages.

The Fifth Amendment to the United States Con-

stitution provides that “[nlo person shall be ... de-

prived of life, liberty, or property, without due process

of law; nor shall private property be taken for public

use, without just compensation.” “The Takings Clause

of the Fifth Amendment is applicable to the States

through the Fourteenth Amendment.” Palazzolo uv.

Rhode Island, 533 U.S. 606, 617 (2001).

In Indiana, as in most jurisdictions, an agreed

order or consent decree “is both contractual, in that it

* Ind. Code § 34-13-1-l1(a) does not, as suggested by the

Indiana Supreme Court, limit contract claims against the state

to those contracts that meet the formality requirements for the

purchase of goods or service: by an administrative agency pur-

suant to Title 4. To the co.rary, section 34-13-1-1(a) expressly

allows contract claims ior breaches of implied contracts that

could not meet Title 4’: formality requirements.

is an agreement between the parties, and an entry

of judgment by the court.” Jn re Estate of Moore,

714, N.E.2d 675, 678 (Ind. Ct. App. 1999); Ash v.

Chandler, 530 N.E.2d 303, 306 (Ind. Ct. App. 1988).

“Valid contracts are property, whether the obligor be a

private individual, a municipality, a state, or the

United States.” Lynch v. United States, 292 U.S. 571,

579 (1934).

It has long been the rule that government can be

held accountable for a breach of contract. United

States v. Smith, 94 U.S. 214 (1876). “When the

[government] enters into contracts its mghts and

duties therein are governed generally by the law

applicable to contracts between private individuals.”

Franconia Associates v. United States, 536 U.S. 129,

141 (2002) (concerning contracts with the United

States). With government contracts, as with private

contracts, “damages are always the default remedy for

breach of contract.” United States v. Winstar Corp., 518

U.S. 839 (1996), see also Justice Scalia’s concurring

opinion, 518 U.S. at 919 (“Virtually every contract

operates, not as a guarantee of a particular future

conduct, but as an assumption of liability in the event

of nonperformance: The duty to keep a contract at

common law means a prediction that you must pay

damages if you do not keep it, —- and nothing else.”)

(citations omitted).

There is an exception under the “sovereign acts

doctrine,” where the act is “public and general,” that

can protect the government from contract liability.

Klamath Irrigation Dist. v. United States, 67 Fed. Cl.

504, 536 (2005) (citing Horowitz v. United States, 267

U.S. 456 (1925) and Winstar, 518 U.S. at 893-96). But

an act of government will be considered to be

sovereign so long as its impact on a contract is

“merely incidental to the accomplishment of a

broader governmental objective.” Jd. Moreover, an

act will not be held to be “public and general if it has

the substantial effect of releasing the Government

from its contractual obligations.” Winstar, 518 U.S. at

899.° Consequently, to decide whether a taking has

* At one time, American states had recognized the principle

of sovereign immunity, that is: suit could not be maintained

against a state without its consent. E.g., Burns v. City of Terre

Haute, 744 N.E.2d 1038, 1040 (Ind. Ct. App. 2001) (citation

omitted). However, “[iJn 1972, [the Indiana] supreme court

abolished the doctrine of sovereign immunity.” Jd. (citing Camp-

bell v. State, 284 N.E.2d 733, 737 (Ind. 1972).) The Campbell

court then explained that, with some exceptions not relevant

here, “the legislature was responsible for considering which

instances of governmental conduct should be immunized from

liability.” Jd. Indiana’s legislature has not subsequently created

immunity for contract claims against the state or state agencies.

The Indiana Contract Claims Act, I.C. § 34-13-1-1 through

7, was recodified in 1998 by P.L.1-1998, SEC. 8. The Act includes

a ten year statute of limitations, but otherwise does not exclude

claims or immunize governmental conduct. The AOPA exemp-

tions set forth in I.C. § 4-21.5-2-5 — including the exemptions for

“contracts for the acquisition, leasing or disposition of property

or the procurement of goods or services” cited by the Indiana

Supreme Court (App. 12) and exemptions for “decision[s] to

initiate or not to initiate an inspection, investigation, or other

similar inquir{ies] that will be conducted by the agency [or]

another agency” and “decision[s] concerning the conduct of an

inspection, investigation, or other similar inquiries” (1.C. §§ 4-

21.5-2-5(9) & (10)) — were added to the Indiana code in 1986.

(Continued on following page)

occurred with respect to a government contract, the

courts must decide whether there is some basis upon

which the state can rely on the sovereign acts doc-

trine and whether there would otherwise be a “full

range of remedies associated with the vindication of a

contract.” Castle v. United States, 301 F.3d 1328, 1332

(Fed. Cir. 2002).

This Court has held that the destruction of con-

tractual rights is a compensable taking under the

Fifth Amendment. In Armstrong v. United States, 364

U.S. 40 (1960), materialmen had liens on vessels

seized by the United States pursuant to the terms of

the contract with the general contractor. Once the

government seized the vessels, it claimed that the

materialmen had no right to enforce their liens

against the government. This Court held that there

was a taking of the liens for which just compensation

was due under the Fifth Amendment: “[t]he total ©

destruction by the Government of all value of these

liens, which constitute compensable property, has

every possible element of a Fifth Amendment ‘taking’

P.L.18-1986, SEC.1. Because the creation of sovereign immunity

is in derogation of Indiana common law, exceptions to

governmental liability “must be strictly construed against lim-

itations on the claimant’s right to bring suit.” Burns, 744 N.E.2d

at 1040 (citation omitted). The Indiana Supreme Court’s ex-

pansive interpretation of AOPA to preclude Raybestos’ claim is

in derogation of Indiana common law, which abolished sovereign

immunity, and results in a deprivation of due process for Ray-

bestos and any other Indiana citizen who is injured by the

state’s breach of the agreed orders it enters.

and is not a mere ‘consequential incidence’ of a valid

regulatory measure.” 364 U.S. at 48.

Here, IDEM was not promulgating regulations or

taking any action generally applicable when it secret-

ly begged EPA to intervene and destroy the particular

contract that IDEM had made with Raybestos. IDEM’s

actions were directed solely at Raybestos, and the

effect of those actions on the contract was anything

but “incidental.” Those actions made the Agreed Or-

der and Raybestos’ decision to forego litigation worth-

less. Moreover, with no opportunity for injunctive

relief and no right to recover damages arising from

IDEM’s breach — the “default remedy” in all breach

of contract cases — Raybestos has been denied all

of the “remedies associated with the vindication of a

contract.” IDEM’s breach and the Indiana Supreme

Court’s subsequent decision that the breach should be

uncompensated have worked a taking of substantial

proportions, one that requires just compensation,

compensation that was fairly measured by the trial

court when it awarded damages.

CONCLUSION

For the foregoing reasons, Raybestos respectfully

asks that the Court grant its petition for a Writ of

Certiorari, reverse the opinion of the Indiana Su-

preme Court, and affirm the trial court’s judgments.

DATED: June 29, 2009

Respectfully submitted,

GEORGE M. PLEWS

Counsel of Record

JEFFREY D. CLAFLIN

BRETT E. NELSON

PLEWS SHADLEY RACHER

& BRAUN LLP

1346 N. Delaware St.

Indianapolis, IN 46202

(317) 637-0700

Attorneys for petitioner,

Raybestos Products Company

App. 1

897 N.E.2d 469

Supreme Court of Indiana.

THE INDIANA DEPARTMENT OF

ENVIRONMENTAL MANAGEMENT,

Appellant (Defendant below),

RAYBESTOS PRODUCTS COMPANY,

Appellee (Plaintiff below).

No. 49S02-0804-CV-183.

Dec. 9, 2008.

Steve Carter, Attorney General of Indiana, David

L. Steiner, Frances H. Barrow, Timothy J. Junk,

Deputy Attorney Generals, Indianapolis, IN, Attor-

neys for Appellant.

George M. Plews, Brett E. Nelson, Indianapolis,

IN, Attorneys for Appellee.

On Petition to Transfer from the Indiana

Court of Appeals, No. 49A02-0609-CV-782.

BOEHM., Justice.

We hold that an agreed order for environmental

cleanup with the Indiana Department of Environ-

mental Management (“IDEM”) is an agency action

governed by the Indiana Administrative Orders and

Procedures Act, not a contract that will support a

claim for damages from IDEM. We also hold that

IDEM has authority to approve risk-based cleanups,

App. 2

and IDEM’s communications with the federal Envi-

ronmental Protection Agency did not violate its

Agreed Order with Raybestos.

Facts and Procedural History

Raybestos Products Company manufactures

brakes and clutches in its Crawfordsville, Indiana

plant. This plant is adjacent to Shelly Ditch, a 5000-

foot open earthen drain surrounded by homes, a

school, fairgrounds, and a community swimming pool.

In 1995, IDEM identified polychlorinated biphenyls

(“PCBs”) in Shelly Ditch and notified Raybestos of its

findings. Raybestos investigated internally and

learned that in the late 1960s its corporate predeces-

sor had used hydraulic oil containing PCBs. Some of

this oil spilled and was pumped to a culvert which

discharged into Shelly Ditch.

In 1996, IDEM sent Raybestos a “Special Notice

of Potential Liability” for cleanup of Shelly Ditch, and

began negotiating a cleanup plan with Raybestos.

IDEM also notified the federal Environmental Protec-

tion Agency (“EPA”) of its findings. IDEM recom-

mended that Shelly Ditch receive a high priority in

the Superfund Hazard Ranking System, but because

of IDEM’s ongoing negotiations, EPA initially as-

signed the site a low priority.

A December 1996 Statement of Work outlined a

plan to “address human health and environmental

concerns and bring the site to closure such that no

future actions are required.” The Statement of Work

App. 3

called for Raybestos to prepare a Risk Assessment for

IDEM’s approval. In February 1997, IDEM and

Raybestos entered an Agreed Order approved by

IDEM’s Commissioner incorporating the Statement of

Work and requiring Raybestos to remove and dispose

of PCBs in Shelly Ditch. Raybestos submitted a Risk

Assessment which concluded that the PCB levels in

Shelly Ditch posed no human health risks. After

review by IDEM staff and an outside risk assessment

contractor, IDEM approved the Risk Assessment in

March 1998. Neither the Agreed Order nor the Risk

Assessment contained a numerical cleanup level.

In May 1998, based on the approved Risk Assess-

ment, Raybestos submitted a Technical Memorandum

proposing no removal of PCBs from Shelly Ditch. Two

months later, IDEM commented on the proposal and

suggested that Raybestos consider a “hot spot” re-

moval, in which high-level areas are cleaned to a

specified level but the site is not cleaned to a uniform

level.

In late August 1998, IDEM’s Commissioner, a

successor to the Commissioner who signed the Agreed

Order, visited Crawfordsville and publicly promised

residents that Shelly Ditch would be cleaned up

promptly. On August 25, 1998, the U.S. Fish and

Wildlife Service identified Shelly Ditch as within the

range of the Indiana bat and the bald eagle, at the

time respectively endangered and threatened species.

At some point, IDEM determined that the Risk

Assessment had been approved in error, and an

App. 4

internal memorandum in September 1998 explored

possible ways to require a more stringent cleanup

level, including involving EPA. At about the same

time, Raybestos proposed a cleanup that would allow

hot spots to contain PCB concentrations up to 238

parts per million (“ppm”). IDEM responded that this

proposal was unacceptable, and in November 1998,

IDEM withdrew its approval of the Risk Assessment

and disapproved the Technical Memorandum.

Raybestos filed a Petition for Administrative

Review in the Office of Environmental Adjudication.

IDEM and Raybestos stipulated that the Agreed

Order provision in which Raybestos agreed to “waive

its right to administrative review of this Order” had

“no effect on the proceedings.” Despite the parties’

stipulation, the Administrative Law Judge dismissed

Raybestos’s petition for review, finding as a matter of

law that Raybestos had waived its right to review of

IDEM’s actions.

Raybestos then sought judicial review of IDEM’s

actions in the Marion Superior Court frequently

referred to as the “Environmental Court.” The Envi-

ronmental Court first concluded that the parties’

stipulation bound the Administrative Law Judge to

permit review. The Environmental Court then deter-

mined that IDEM lacked authority under the Agreed

Order to withdraw approval of the Risk Assessment

and that IDEM’s decision to withdraw approval was

“arbitrary and capricious” and “not supported by any

substantial evidence.” The Environmental Court

found that IDEM’s only reason for withdrawing

App. 5

approval was to avoid setting a precedent for the

cleanup level proposed by Raybestos, and ordered

IDEM to reinstate its approval of the Risk Assess-

ment and to approve the Technical Memorandum.

IDEM did not appeal that judgment, and reinstated

the Risk Assessment and approved the Technical

Memorandum.

Meanwhile, beginning in October 1998, IDEM

urged EPA to require a more complete cleanup, and in

December 2000, EPA issued a Unilateral Agreed

Order (““UAO”) requiring Raybestos to clean up Shelly

Ditch to a level of no greater than 10 ppm PCBs. This

cleanup was substantially more expensive than a 238

ppm hot spot cleanup.

In July 2002, Raybestos filed the complaint

initiating this lawsuit in Marion Superior Civil

Division, claiming breach of contract by IDEM. Ray-

bestos alleged that the Agreed Order constituted a

contract that IDEM breached by withdrawing ap-

proval of the Risk Assessment, disapproving the

Technical Memorandum, and requesting EPA involve-

ment in ordering a more stringent cleanup. Raybestos

sought damages and a declaratory judgment that

IDEM is liable for any future expenses incurred in

remediating Shelly Ditch beyond what was required

by the 1997 Agreed Order.

IDEM moved to dismiss under Trial Rules

12(B)\(1) and 12(B)(6), asserting that (1) the trial

court lacked subject matter jurisdiction, (2) any

damages were caused by EPA, (3) IDEM did not

App. 6

breach the Agreed Order, and (4) the Agreed Order is

not a contract enforceable by a claim for damages.

Raybestos moved for summary judgment, contending

that-the Environmental Court’s order established

IDEM’s breach and that IDEM had admitted the

breach. The trial court granted partial summary

judgment for Raybestos, concluding that as a matter

of law, IDEM’s communications with EPA breached

the Agreed Order and IDEM’s right or obligation to

seek EPA enforcement under some circumstances did

not justify the breach. The trial court certified its

partial summary judgment order for interlocutory

appeal, but the Court of Appeals denied IDEM’s

request to accept an interlocutory appeal.

Damages from the alleged breach then proceeded

to a bench trial. On June 12, 2006, the trial court

entered its findings of fact, conclusions of law, and

partial judgment. The trial court found that EPA’s

enforcement action was due solely to “IDEM’s persis-

tent and repeated requests” that EPA address Shelly

Ditch, and entered a partial judgment for

$11,645,321.58 — the difference between the cost of

the EPA-required cleanup and the projected costs of a

cleanup to 238 ppm — plus post-judgment interest at

the statutory rate. IDEM appealed this order and the

trial court’s previous partial grant of summary judg-

ment. On October 30, 2006, after hearing additional

evidence, the trial court entered an additional award

of $4,716,691.33 representing future cleanup costs

and attorney fees. IDEM also appealed this order, and

the Court of Appeals consolidated the two appeals.

App. 7

The Court of Appeals reversed, holding that even

if the Agreed Order were a contract, it would be

unenforceable as “contrary to public policy” because a

cleanup level of 238 ppm is twenty times the level

allowed by federal regulations. Ind. Dept of Envtl.

Mgmt. v. Raybestos Prods. Co., 876 N.E.2d 759, 763

(Ind.Ct.App.2007). We granted transfer.

We hold that the Agreed Order is not a contract

that will support a claim for damages. For the rea-

sons explained below, we do not agree that IDEM

violated the order by communicating with EPA, or

that IDEM’s original agreenient to a less stringent

cleanup than EPA regulations prescribe would neces-

sarily contravene public policy.

Standards of Review

IDEM appeals the trial court’s denial of the

motion to dismiss, partial grant and partial denial of

summary judgment, and judgment entries dated June

12, 2006 and October 30, 2006 containing findings of

fact and conclusions of law. To the extent they involve

only legal issues, we review the trial court’s orders de

novo. Charter One Mortgage Corp. v. Condra, 865

N.E.2d 602, 604 (Ind.2007); Univ. of S. Ind. Found. v.

Baker, 843 N.E.2d 528, 531 (Ind.2006). We uphold the

trial court’s findings of fact unless they are clearly

erroneous. Ind. Trial Rule 52(A).

App. 8

I. Damages for Breach of the Agreed Order

Raybestos seeks damages under Indiana Code

section 34-13-1-1 (2004), which permits claims

against the state arising out of express or implied

contracts. IDEM responds that Raybestos may not

bring a contract action for two reasons: (1) the Agreed

Order is an agency action that is subject to challenge

only under the Indiana Administrative Orders and

Procedures Act (“AOPA”), I.C. §§ 4-21.5-1-1 to -7-9

(2004), and (2) the Agreed Order fails to meet the

statutory requirements ior a state agency contract.

For the reasons explained below, we agree with IDEM

and hold that the Agreed Order is not a contract that

will support a claim for damages against the State.’

A. Indiana Administrative Orders and Proce-

dures Act

AOPA “establishes the exclusive means for judi-

cial review of an agency action.” Jd. § 4-21.5-5-1.

AOPA exempts several agencies and agency actions

from this provision, but neither IDEM nor the Agreed

Order is among them. Ind.Code Ann. §§ 4-21.5-2-4, -5

(West Supp.2008). Accordingly, if IDEM is an agency

' Because we hold that the Agreed Order is not a contract.

we do not address Raybestos’s arguments that rely on applica-

tion or extension of private contract doctrine: that IDEM

breached a contract by preventing Raybestos’s performance, and

that for at least government contracts, we should impose a

general duty of good faith and fair dealing.

App. 9

and the Agreed Order is an agency action, AOPA is

the exclusive means to review the order.

As a preliminary matter, we address whether

IDEM has preserved its claim that AOPA limits the

remedies available to Raybestos. IDEM argued before

the trial court that the Agreed Order is not enforce-

able by a claim for damages, but IDEM appears to

have framed this argument specifically in terms of

AOPA for the first time in its brief to the Court of

Appeals. Generally, an appellate court will not review

an issue that was not presented to the trial court.

Cavens v. Zaberdac, 849 N.E.2d 526, 533 (Ind.2006).

Raybestos briefed the issue and does not contend that

IDEM waived the issue of whether AOPA precludes a

claim for breach of contract. In any event, the issue

challenges the jurisdiction of the trial court, and for

this reason we address it. See State Bd. of Tax

Comm’rs v. Ispat Inland, Inc., 784 N.E.2d 477, 482

(Ind.2003) (“Under Indiana law, if a party is required

by the Administrative Orders and Procedures Act to

exhaust its administrative remedies before an agency

prior to obtaining judicial review of the agency deci-

sion, courts are completely ousted of subject matter

jurisdiction to hear the case at all.”); Town Council of

New Harmony v. Parker, 726 N.E.2d 1217, 1223 n. 8

(Ind.2000) (lack of subject matter jurisdiction cannot

be waived).

IDEM is plainly an “agency” as defined ..y Indi-

ana Code section 4-21.5-1-3, and the Agreed Order

was an action by its Commissioner. AOPA defines

“agency action” as “the whole or part of an order,”

App. 10

“the failure to issue an order,” or “[aJn agency’s per-

formance of, or failure to perform, any other duty,

function, or activity under this article.” I.C. § 4-21.5-

1-4. Both the Agreed Order — an administrative order

entered pursuant to section 13-25-4-23 — and IDEM’s

communications with EPA are agency actions. If we

view this claim as one for failure to comply with an

implied provision of the Order, it seeks relief from an

agency action because the order itself is by definition

an “agency action.” If on the other hand the claim is

for failure to carry out an obligation under the Order

not to communicate with EPA, it is for “failure to

perform” a “duty, function, or activity under this

article.” Indeed, communication with EPA on enforce-

ment matters and appropriate remedies is a duty or

function mandated by federal law. E.g., 40 C.F.R.

§§ 300.505 (2008) (requiring detailed annual consul-

tation about activities), 300.515 (requiring communi-

cation about remedy selection); see also Superfund

Memorandum of Agreement Between the State of

Indiana and the United States Environmental Protec-

tion Agency Region V (1992) (outlining agencies’

agreement to communicate regularly, include each

other in settlement agreements, and permit changes

in lead agency status).

Pursuant to a statute specifically addressing

review of LIDEM’s actions, the exclusive means for

review of an agency action of the IDEM Commis-

sioner is by petition to the Office of Environmental

Adjudication. I.C. § 4-21.5-7-3. That administrative

body must grant relief to a party who has been

App. 11

prejudiced by agency action that is, among other

things, “arbitrary, capricious, an abuse of discretion,

or otherwise not in accordance with law,” or “unsup-

ported by substantial evidence.” Id. § 4-21.5-5-14. The

forms of relief available are to “set aside an agency

action and: (1) remand the case to the agency for

further proceedings; or (2) compel agency action that

has been unreasonably delayed or unlawfully with-

held.” Jd. § 4-21.5-5-15. Money damages are not

authorized, presumably reflecting the General As-

sembly’s policy judgment that specific performance is

a more appropriate remedy for agency error than a

damages award ultimately borne by the taxpayers.

In sum, pursuant to AOPA, exclusive jurisdiction

to review the Agreed Order and IDEM’s obligations

and functions under the order lies in the administra-

tive procedure provided by these statutes, and a claim

against the State or its agency for damages is not

among the available remedies.

B. Contract Claims Against State Agencies

Raybestos contends that statutory provisions

other than AOPA authorize its claim. Specifically,

Raybestos points to Indiana Code section 34-13-1-

l(a), which allows claims against the State for

breaches of both express and implied contracts.

Raybestos essentially contends that this provision

overrides the exclusive jurisdiction provision of AOPA.

We think these statutory provisions are not inconsis-

tent and collectively demonstrate that Raybestos’s

App. 12

claim is not well founded. Rather than apparently

inconsistent provisions, AOPA and the statutes

governing state contracts fit nicely together.

AOPA does not completely foreclose contract

claims against state agencies. For example, exempted

from AOPA’s coverage are agency contracts for the

acquisition, leasing, or disposition of property, or the

procurement of goods or services. Ind.Code Ann. § 4-

21.5-2-5(11) (West Supp.2008). This exemption mir-

rors the provisions found in Indiana Code sections 4-

13-2-14.1 and 4-13-2-14.2, which require contracts .

with state agencies to be in writing and approved by

the Commissioner of the Indiana Department of

Administration, the Director of the Indiana State

Budget Agency, and the Attorney General. IDEM

asserts that the Agreed Order does not meet these

requirements, and Kaybestos concedes this point but

responds that the requirements do not apply to its

claim because these formalities apply only to con-

tracts for purchases of goods or services. Raybestos

argues that the limited application of these require-

ments to contracts for goods or services is shown by

their placement in a chapter labeled “Administrative

Management of State Services, Employees, Pur-

chases, and Property.” To the extent Raybestos

argues that the chapter name requires a particular

interpretation, the General Assembly has instructed

that the descriptive headings of titles, articles, and

chapters “are intended for organizational purposes

only and are not intended to affect the meaning,

application or construction of the statute they

App. 13

precede.” I.C. §1-1-1-5(f). But assuming these

requirements apply only to contracts for goods or

services, this merely reflects the point that the very

same contracts are exempted from the exclusive

judicial review provisions. In other words, pre-

sumably because a contract for the purchase of goods

or services will support a claim for damages, it is

exempted from the exclusive jurisdiction provision of

AOPA. Raybestos concedes the Agreed Order is not

such a contract. It therefore is not exempted from

AOPA.

II. IDEM’s Authority to Approve Risk-Based

Cleanups

Because we hold that under AOPA the Agreed

Order does not support a claim for damages, we need

not decide whether public policy precludes the con-

struction of the Agreed Order urged by Raybestos.

However, because the Court of Appeals reversed the

trial court’s judgment on this issue, we briefly turn to

IDEM’s authority to order risk-based cleanups, clean-

ups above or below the numerical level set by regula-

tion.” The Court of Appeals concluded that IDEM

* Raybestos argues that the Environmental Court order

precludes IDEM from claiming that it lacked authority to

approve a cleanup that did not reduce PCBs to 10 ppm. The

order concluded that IDEM lacked authority to withdraw the

Risk Assessment. It did not specifically address whether IDEM

had authority to approve a cleanup above 10 ppm.

In any event, claim preclusion applies only when the party

against which it will be applied had a full and fair opportunity

(Continued on following page)

App. 14

lacked authority to approve a cleanup level that did

not meet the applicable federal standard of 10 ppm.

For this conclusion, the Court of Appeals relied on

the federal PCB Spill Cleanup Policy, 40 C.F.R.

§§ 761.120-761.135 (2008), which provides that “[s]oil

contaminated by the spill will be decontaminated to

10 ppm.” Id. § 761.125(c)(4)(v). Even if applicable to

this cleanup,’ that policy also gives EPA “flexibility to

allow less stringent or alternative decontamination

measures based upon site-specific considerations.”

to litigate the issues or when application would be unfair given

the circumstances. Tofany v. NBS Imaging Sys., Inc., 616 N.E.2d

1034, 1038 (Ind.1993) (citing Parklane Hosiery Co., Inc. v. Shore,

439 U.S. 322, 99 S.Ct. 645, 58 L.Ed.2d 552 (1979)). It would be

unfair to preclude IDEM from arguing its authority because the

previous action was for administrative relief, not money dam-

ages, and by that time EPA had already ordered a more strin-

gent cleanup. Jd. (“[Ujnfairness to the defendant against whom

an estoppel is asserted may result ... where the defendant had

little incentive to vigorously litigate the first action either

because the damages were small or nominal, or because future

suits were not foreseeable.” (quoting Parklane Hosiery, 439 U.S.

at 330-31)).

* The parties dispute whether the 10 ppm standard applies

to Shelly Ditch. That standard does not apply to pre-1987 spills,

40 C.F.R. § 761.120(a)(1), and the parties dispute whether the

spill occurred in the late 1960s o1 continuously through 1996.

* This federal PCB Spill Cleanup Policy has been incorpo-

rated by reference in the Indiana Administrative Code, 329

L.A.C. 4.1-5-1 (2000), and provides IDEM the same flexibility

afforded to EPA by federal regulation. This policy was promul-

gated as part of the solid waste management regulations, which

the IDEM Commissioner can enforce by lawsuit or agreed order.

I.C. §§ 13-14-2-6, -20-15-7, -30-3-3. We do not address whether it

(Continued on following page)

App. 15

Id. § 761.120(c). We agree with Raybestos that the

policy therefore does not constrain IDEM from agree-

ing to less stringent measures.

Ill. IDEM’s Actions Did Not Violate the

Agreed Order

We respectfully disagree with the trial court’s

conclusion that money damages are necessary to

further the “interest in the government abiding by its

promises” which facilitates cleanup agreements. Our

holding today does not remove the incentive to enter

into voluntary cleanup agreements with IDEM. If

IDEM unjustifiably violates an agreement or acts

arbitrarily, its performance can be compelled — as

Raybestos demonstrated by seeking judicial review of

IDEM’s withdrawal of approval of the Risk Assess-

ment.

On the other hand, the public interest is not

served by enforcing promises that were never made.

We accept the trial court’s finding that EPA would not

have acted absent IDEM’s prodding, and we recognize

the practical difficulties EPA’s intervention caused

Raybestos. For better or worse, federal “overfiling” —

EPA’s initiation of a cleanup after a state has brought

an enforcement action — is a risk known to parties

applics to this action instituted under the Hazardous Sub-

stances Response Trust Fund provisions, id. §§ 13-25-4-1 to -28.

App. 16

negotiating a cleanup with a state agency.’ If Raybes-

tos wished to foreclose EPA action, it needed to deal

with EPA. At no time did IDEM promise not to in-

volve EPA. The Agreed Order does not purport to

forbid IDEM’s communication with EPA, and IDEM

could not bind itself to fail to carry out its statutory

obligations, including compliance with the federal

regulations requiring communication between the

agencies. E.g., 40 C.F.R. §g 300.505 (2008) (requiring

detailed annual consultation about activities), 300.515

(requiring communication about remedy selection).

Moreover, the Agreed Order itself acknowledged the

potential applicability of federal authority and directs

compliance with the most stringent cleanup require-

ments: “In the event of a conflict in the application

of Federal, state, or local laws, ordinances and

* See Clifford Rechtschaffen & David L. Markell, Reinvent-

ing Environmental Enforcement and the State / Federal Relation-

ship 109-11 (2003) (describing a judicial split on the issue of

whether EPA has authority to overfile, with most courts holding

that overfiling is appropriate); Hubert H. Humphrey III &

LeRoy C. Paddock, The Federal and State Roles in Environmen-

tal Enforcement: A Proposal for a More Effective and More

Efficient Relationship, 14 Harv. Envtl. L.Rev. 7, 14 (1990) (“After

an overfiling, the regulated entities quite understandably

become concerned that, without involving EPA, they cannot be

sure a compliance schedule or a penalty amount agreed to by a

state is final.”); Christopher J. Redd, Comment, The Adversarial

Relationship Between the States and EPA: Conflict Over State

Authority Under CERCLA, 3 Dick. J. Envtl. L. & Pol’y 101, 105

(1993) (“From the perspective of a responsible party, settlement

with state officials docs not necessanly represent the end of the

matter, or the limit of their liability.”).

App. 17

regulations, |[Raybestos] shall comply with the most

stringent of said laws, ordinances, or regulations,

unless provided otherwise in writing by IDEM.”

Finally, the Agreed Order provides that “IDEM and

[Raybestos] reserve all rights and defenses they may

have pursuant to any available legal authority unless

expressly waived herein.” In short, IDEM did not and

could not waive its authority to communicate with

EPA, and did not commit to do more than suspend its

own enforcement efforts.

Conclusion

Because the Agreed Order does not support a

claim for damages and was not violated by IDEM’s

actions, the trial court’s orders denying IDEM’s

motions to dismiss and for summary judgment are

reversed. This case is remanded with instructions to

vacate the judgments in favor of Raybestos and

dismiss the complaint for lack of subject matter

jurisdiction.

SHEPARD, C.J., and DICKSON, SULLIVAN, and

RUCKER, JJ., concur.

App. 18

STATE OF _) IN THE MARION COUNTY

INDIANA )__ SUPERIOR COURT

COUNTY OF )~”° CAUSE NO.

MARION ? 49D 12-G209-PL-001553

RAYBESTOS PRODUCTS _ )

COMPANY,

Plaintiff,

Vv.

THE INDIANA

DEPARTMENT OF

ENVIRONMENTAL

MANAGEMENT,

Defendant.

Nee ee Oe

ORDER GRANTING, IN PART, AND

DENYING, IN PART, THE CROSS MO-

TIONS FOR SUMMARY JUDGMENT

(Filed Jul. 6, 2004)

On December 15 and 18, 2003 defendant Indiana

Department of Environmental Management (“IDEM”)

and plaintiff Raybestos Products Company (“Raybes-

tos”) filed cross motions for summary judgment. The

Court heard oral argument on the cross motions on

June 10, 2004. For the reasons set forth below, Ray-

bestos’ and IDEM’s Motions are GRANTED, in part

and DENIED in part.

The essential facts are not disputed and are well

summarized in Judge Keele’s Order on Petition For

Review dated June 1, 2001 as follows. In 1996, IDEM

App. 19

alleged that Raybestos Products Company was re-

sponsible for the presence of PCBs in Shelly Ditch

near Raybestos’ Crawfordsville plant. The parties

entered into an Agreed Order that required Raybestos

to complete certain sequential steps, obtaining ap-

proval from IDEM for each step. Raybestos was

required to evaluate the extent of the damage, pre-

pare a Risk Assessment to evaluate the risk posed by

the PCB’s, prepare a Technical Memorandum defin-

ing cleanup goals on the conclusions of the Risk

Assessment and complete the cleanup. Raybestos

prepared and submitted its Baseline Risk Assessment

and IDEM ultimately approved it. Raybestos then

submitted its Technical Memorandum to which IDEM

made comment. Raybestos addressed cach of the

stated concerns and the parties ultimately reached an

agreement to clean all “hot spots” to no more than

238 ppm.

The IDEM commissioner who signed the Agreed

Order was replaced with a new commissioner, John

Hamilton. A new assistant commissioner, Mary Beth

Tuohy, was brought in from outside the agency. Re-

sponsibility for Shelly Ditch, originally in the Project

Management Section, was transferred to Harold

Atkinson, an employee in the Site Investigations

Section having virtually no experience with risk

assessments. The new assistant commissioner de-

cided that Raybestos’ proposed cleanup level of 238

ppm based on the site specific Risk Assessment would

not be approved. She believed it would set a bad prec-

edent. She then instructed her new project manager

App. 20

to disapprove Raybestos’ Technical Memorandum

and, because it was based on the already approved

Risk Assessment, approval of that document had to

be “withdrawn”. The parties engaged in extensive

administrative litigation, which culminated in judi-

cial review of IDEM’s actions. Judge Keele ordered

IDEM to reinstate the Risk Assessment and to ap-

prove the Technical Memorandum. After piotracted

litigation, Judge Keele ordered IDEM to comply with

his ruling requiring it to approve the Risk Assess-

ment, which IDEM ultimately did.

IDEM and Raybestos agree that IDEM repeat-

edly asked the United States Environmental Protec-

tion Agency (“EPA”) to step in and do what IDEM

could not do under the Agreed Order: force Raybestos

to perform a cleanup different than the cleanup

required by IDEM’s Agreed Order. On December 6,

2000, EPA complied with IDEM’s requests and issued

a Unilaterai Administrative Order (““UAO”) directing

Raybestos to conduct a cleanup. Mr. Muno, the Super-

fund Director, testified that he could not recall any

other instance where EPA intervened and began its

own enforcement proceedings where an Agreed Order

already was in place. However, the levels of PCB

proposed by the Risk Assessment were high enough

to be qualified as a high priority under the EPA’s

Superfund Hazard Ranking System. Raybestos has

incurred substantial costs to comply with the EPA’s

requirements, which are in excess of what it would

have cost Raybestos to do a cleanup based on the

approved Risk Assessment.

App. 21

Raybestos seeks damages and a declaratory

judgment against IDEM for soliciting and obtaining

the Unilateral Administrative Order, which Raybes-

tos characterizes as a breach of the Agreed Order. The

Agreed Order is a settlement agreement, a contract.

The essential elements of a breach of contract action

are: 1) the existence of a contract, 2) the defendant’s

breach thereof, and 3) damages. Fowler v. Campbell,

612 N.E.2d 596, 600 (Ind.Ct.App.1993). The plaintiff

in such an action has the burden of demonstrating

that the defendant’s breach was a substantial factor

contributing to,the damages. Holloway v. Bob Evans

Farms, Inc., 695 N.E.2d 991, 995 (Ind.Ct.App.1998).

The test for measuring damages in a breach of con-

tract action is the foreseeability of such damages at

the time of entering into the contract rather than the

facts existing and known to the parties at the time of

the breach. Raybestos agreed to perform a risk-based

clean up and IDEM accepted. Through the parties’

contract, IDEM received the benefit of forcing a risk-

based clean-up without litigation, and Raybestos gave

up its right to challenge IDEM’s right to require it to

do any cleanup. If the actions of the EPA in issuing

the UAO were the result of the efforts on the part of

IDEM to force a clean up different than that to which

it had committed itself in the Agreed Order, then

Raybestos will have proven a breach of the contract.

While the evidence is not in conflict as to

whether IDEM tried to get the EPA to step in and

change the standards of the clean up, it is in conflict

as to whether the EPA would have done so absent the

App. 22

solicitation of IDEM. In 1986, the EPA had issued a

UAO to the owners of another site in the Sugar Creek

Watershed, PR Mallory, to compel the cleanup of

excessive levels of PCBs. PR Mallory was forced to

clean up the PCB’s to a level of 10 ppm or lower. The

allowable levels of PCBs under the Risk Assessment

prepared by Raybestos were considerably higher than

levels permitted by the EPA. Further, the EPA has

the right to over-file if the state action is ineffective.

Therefore, it can’t be said as a matter of law that the

actions of the EPA were the direct consequence of the

efforts by IDEM. This is Raybestos’ burden to prove

at trial.

IDEM contends it can’t be bound to the terms the

Agreed Order because it has the ability to ask for the

intervention of the EPA by substituting the EPA as

the lead agency in any enforcement action at any

time. Further IDEM contends that the Agreed Order

did not limit its ability to solicit the assistance of the

EPA, and that over-filing is always a risk a polluter

takes when it deals with IDEM. While tne National

Contingency Plan directs agencies with overlapping

jurisdiction on environmental matters to communi-

cate with one another, there is designated evidence

that IDEM did not communicate with the EPA just to

coordinate efforts. Designated evidence indicates that

IDEM actively solicited the EPA to take a lead role

when IDEM’s leadership changed and it wished to

avoid the terms of the Agreed Order. Paragraph 6 of

the Agreed Order specifically states that IDEM shall

be bound by the terms of the Agreed Order. The

App. 23

Agreed Order provides an alternative dispute resolu-

tion process, but IDEM did not avail itself of this

process when it determined that it wanted to avoid

the Order all together. If IVEM is not bound to ac-

cept, in action and deed, the terms of the Agreed

Order, then why would any citizen enter into such an

agreement? The finality of the remedy was addressed

in the Agreed Order as follows: “The objective of the

RA [Removal Action] will be to address human

health, environmental concerns and bring the site to

closure such that no further actions are required.”

Therefore, the Court grants partial summary

judgment to the Plaintiff a the issue of breach of the

contract. The facts are not in dispute: IDEM actively

sought the UAO from the EPA to avoid the terms of

the Agreed Order, which were binding upon it. The

Court specifically finds that IDEM’s statutory ability,

and obligation at times, to seek the intervention of

the EPA was not a justification for its breach of the

Agreed Order. IDEM could have chosen to seek anv

level of clean up it deemed appropriate or could have

sought the advice or intervention of EPA up until the

time it entered into the Agreed Order. At that point in

time it had the legal duty to abide by its agreement

and to take no actions contrary thereto. However, the

Court can not say, as a matter of law, that the actions

of the EPA in issuing the UAO were the direct conse-

quence of the solicitation by IDEM. Therefore, the

issue of whether Raybestos suffered any damages

directly flowing from the breach of contract remains

in dispute. In addition, the Plaintiff has failed to

App. 24

state a reason why the American Rule as to attorney

fees does not apply, thus precluding this element of

damages. Therefore, the Court grants partial sum-

mary judgment for the Defendant and orders that

attorney fees are not recoverable by the Plaintiff, in

the event the Plaintiff prevails on the underlying

claim.

Dated: July 6, 2004 /s/ Robyn L. Moberly

Honorable Robyn Moberly,

Judge

Marion County Superior

Court, Civil Division

Copies to:

George M. Plews Timothy J. Junk

(Atty. No. 6274-49) Office of the Attorney

Brett E. Nelson General

(Atty. No. 22096-53 Indiana Government

PLEWS SHADLEY Center South

RACHER & BRAUN Fifth Floor

1346 North Delaware 402 W. Washington Street

Street Indianapolis, IN

Indianapolis, IN 46204-2770

46202-2415 Telephone: (317) 232-6247

Telephone: (317) 637-0700

Fax: (317) 637-0710

App. 25

876 N.E.2d 759

Indiana Dept. of Environmental Management v.

Raybestos Products Co.

Ind.App.,2007.

Court of Appeals of Indiana.

The INDIANA DEPARTMENT OF

ENVIRONMENTAL MANAGEMENT,

Appellant-Defendant,

RAYBESTOS PRODUCTS COMPANY,

Appellee-Plaintiff.

No. 49A02-0609-CV-782.

Nov. 15, 2007.

Steve Carter, Attorney General of Indiana, David

L. Steiner, Frances Barrow, Timothy J. Junk, Deputy

Attorneys General, Indianapolis, IN, Attorneys for

Appellant.

George M. Plews, Brett E. Nelson, Plews Shadley

Racher & Braun LLP, Indianapolis, IN, Attorneys for

Appellees.

OPINION

MATHIAS, Judge.

The Indiana Department of Environmental

Management (“IDEM”) appeals the judgment of the

Marion Superior Court in favor of Raybestos Products

Company (“Raybestos”) in Raybestos’s breach of con-

tract claim. IDEM raises three issues upon appeal,

one of which we find dispositive: whether the trial

court erred in granting partial summary judgment on

App. 26

the issue of whether IDEM breached an agreed order

entered into by the parties thus giving rise to a

breach of contract claim.

We reverse.

Facts and Procedural History

Raybestos operates a plant in Crawfordsville,

Indiana which manufactures automobile brakes and

clutches. The plant is located next to Shelly Ditch,

which is an open earthen drain bordered by

seventeen homes, a school, a fairground, and a

swimming pool. Surface water from the Raybestos

plant flows through a culvert into Shelly Ditch, which

empties into Sugar Creek approximately one mile

from the Raybestos plant. Testing performed in 1995

by IDEM revealed that polychlorinated biphenyls,

commonly known as “PCBs,” were found in Shelly

Ditch downstream from the Raybestos plant, but not

upstream.

Eventually, IDEM sent Raybestos a notice of

potential liability. IDEM also sent a memorandum to

the federal Environmental Protection Agency (“EPA”)

recommending that Shelly Ditch be listed as a high

priority in the Superfund Hazard Ranking. Instead,

the EPA listed the Raybestos site as a low priority

because IDEM was negotiating a cleanup order. On

February 28, 1997, IDEM and Raybestos entered into

an “Agreed Order” pursuant to Indiana Code section

13-25-4-23 (1998), in which Raybestos agreed to

prepare a risk assessment subject to the approval of

App. 27

IDEM. Then, based upon the risk assessment,

Raybestos was to propose a removal plan, again

subject to IDEM approval.

Raybestos prepared and submitted a risk assess-

ment, which was ultimately approved by IDEM.

Based upon the risk assessment, Raybestos then

submitted its “technical memorandum” describing its

planned cleanup. The proposed cleanup allowed

certain “hot spots” to contain PCB levels of no more

than 238 parts per million (“ppm”). Following

personnel changes, IDEM determined that Raybestos’

proposed cleanup would not be approved because it

would set a bad precedent. IDEM then disapproved

the cleanup proposal and, because the cleanup

proposal was based upon the already-approved risk

assessment, withdrew its approval of the risk assess-

ment.

Displeased with this turn of events, Raybestos

sought administrative review of IDEM’s actions.

At a dispute resolution meeting, IDEM informed

Raybestos that no PCBs could be present at the

cleanup site at levels higher than 10 ppm. After a

hearing before an Administrative Law Judge (“ALJ”),

the ALJ determined that Raybestos had waived its

right to seek review of IDEM’s actions based upon the

terms of the Agreed Order. Raybestos sought judicial

review of the ALJ’s determination in the Marion

Circuit Court. On June 1, 2001, Judge Michaei D.

Keele issued findings of fact and conclusions of law,

determining therein that Raybestos had not waived

its right to seek review of IDEM’s actions and that

App. 28

IDEM had no authority to withdraw its earlier

approval of the risk assessment. Judge Keele ordered

IDEM to re-approve the risk assessment and ordered

it to approve of the cleanup proposed in Raybestos’

technical memorandum. IDEM did not appeal this

order. Instead, IDEM had been contacting the EPA

and, after considerable prodding, convinced the EPA

to become involved in the cleanup of the Raybestos

site. On December 6, 2000, the EPA issued a

Unilateral Administrative Order requiring Raybestos

to clean up the PCBs to a level of no greater than 10

ppm. The cleanup required by the EPA was

substantially more costly than the one which was

approved by IDEM per court order.

On July 26, 2003, Raybestos filed in the Marion

Superior Court a complaint for breach of contract

against IDEM, alleging that IDEM had breached the

Agreed Order and seeking as damages the sub-

stantially higher costs of the EPA-imposed cleanup.

On December 17, 2003, IDEM filed a motion for

summary judgment, which Raybestos responded to by

filing a cross-motion for summary judgment. On June

10, 2004, the trial court held a summary judgment

hearing. On July 6, 2004, the trial court granted

partial summary judgment in favor of Raybestos on

the issue of breach, but determined that there were

genuine issues of material fact as to whether the

EPA’s involvement was a direct consequence of

IDEM’s solicitations.

On August 3, 2005, the parties filed stipulations

regarding damages, and on August 8, 2005, a bench

App. 29

trial began. On June 12, 2006, the trial court entered

judgment in favor of Raybestos in the amount of

$11,645,321.58. On October 30, 2006, the trial court

entered judgment regarding additional damages and

attorney fees in the amount of $4,716,691.33. IDEM

now appeals.

Standard of Review

In this case, IDEM challenges several of the trial

court’s orders. However, as we find the summary

judgment issue dispositive, we address only the trial

court’s grant of summary judgment in favor of

Raybestos on the issue of whether IDEM’s actions

constituted a breach of the Agreed Order.

Summary judgment is a procedural means to halt

litigation when there are no factual disputes and to

allow the case to be determined as a matter of law.

Garneau v. Bush, 838 N.E.2d_ 1134, 1140

(Ind.Ct.App.2005), trans. denied. Under Indiana Trial

Rule 56, the moving party bears the burden of

showing that there are no genuine issues of material

fact; if the moving party meets its burden, then the

burden shifts to the nonmoving party to set forth

facts showing the existence of a genuine issue for

trial. Id. Summary judgment is appropriate only

where the designated evidence reveals no genuine

issues of material fact for trial and the moving party

is entitled to judgment as a matter o: law. ZId.

Summary judgment is inappropriate if any material

facts are in dispute or even if undisputed facts can

lead to conflicting material inferences. /d.

App. 30

Discussion and Decision

In its order granting partial summary judgment

to Raybestos, the trial court concluded that the

Agreed Order was a valid contract and that IDEM

breached the Agreed Order. However, the trial court

concluded that genuine issues of material fact pre-

cluded summary judgment on the issue of resulting

damages. IDEM claims that the Agreed Order is not a

valid contract, but that even if it were to be con-

sidered a valid contract, its actions did not constitute

a breach. Thus, if we assume without deciding that

the Agreed Order was a binding contract, the dis-

positive issue becomes whether IDEM breached the

Agreed Order.

Raybestos argues that IDEM’s actions breached

the Agreed Order. Although the parties present many

arguments, we find one to be dispositive: whether the

cleanup IDEM originally agreed to complied with

applicable federal regulations. The cleanup proposed

by Raybestos, which was based upon the Risk Assess-

ment which IDEM had already approved, called for a

cleanup level of 238 ppm. IDEM claims that the

applicable federal regulations require PCB spills to be

cleaned up to a level of no more than 10 ppm. In

support of this claim, IDEM cites 40 C.F.R. section

761.125(c)(4)(v) (2007), which states in relevant part:

Soil contaminated by the spill will be decontaminated

to 10 ppm PCBs by weight provided that soil is

excavated to a minimum depth of 10 inches. The

excavated soil will be replaced with clean soil, i.e.,

App. 31

containing less than 1 ppm PCBs, and the spill! site

will be restored (e.g., replacement of turf).

Raybestos does not directly deny the applicability

of this federal regulation in its appellee’s brief.

Raybestos does refer to 40 C.F.R. section 761.120(c)

(2007), which gives the EPA the “flexibility to allow

less stringent or alternative decontamination meas-

ures based upon site-specific considerations.” Raybestos

does not explain, however, how this section allows

IDEM the same flexibility." More importantly, the

Agreed Order upon which Raybestos bases its breach

of contract claim specifically states that the most

stringent standard will apply. See Appellant’s App. p.

3730.

Thus, the 238 ppm cleanup proposed by

Raybestos and based on the IDEM approved risk

assessment did not meet the applicable federal

standards. We fail to see how IDEM had any

authority to approve a cleanup which did not comply

with these standards. Again, such compliance was

contemplated in the Agreed Order itself, which

provided that, in the case of a conflict in the

applicable laws, rules, or ordinances, that the most

stringent standard would apply. See Appellant’s App.

p. 3730.

' It is apparent that the EPA did not order a less stringent

cleanup at the Raybestos site.

App. 32

Based upon public policy grounds, we will not

enforce agreements that contravene statute, that

clearly tend to injure the public in some way, or that

are otherwise contrary to the declared public policy

of Indiana. Ahuja v. Lynco Ltd. Med. Research, 675

N.E.2d 704, 707 (Ind.Ct.App.1996), trans. denied.

Clearly, an agreement which would permit cleanup

levels over twenty times that of the applicable federal

regulations would be contrary to public policy, and

Raybestos may not rely upon such an agreement or

recover for any breach thereof by IDEM. We therefore

reverse the judgment of the trial court.

Reversed.

BAKER, C.J., and KIRSCH, J., concur.

App. 33

STATE OF ) IN THE MARION COUNTY

INDIANA )__ SUPERIOR COURT

COUNTY OF )~””” CAUSE NO.

MARION ? 49D12-0209-PL-001553

RAYBESTOS PRODUCTS )

COMPANY,

Plaintiff,

THE INDIANA

DEPARTMENT OF

ENVIRONMENTAL

MANAGEMENT,

Defendant.

Nees wee ee “ee”

JUDGMENT ENTRY REGARDING ADDI-

TIONAL DAMAGES AND ATTORNEY FEES

(Filed Oct. 30, 2006)

This Court’s June 12, 2006 Judgment Entry

(“June 12 Judgment”) set a hearing on the issue of

the amount of attorney fees incurred and recoverable

by Plaintiff Raybestos Products Company (“Raybes-

tos”) as a result of the breach of a February 29, 1997

Agreed Order by the Indiana Department of Environ-

mental Management (“IDEM”). Prior to the six-day

bench trial in this matter, Raybestos and IDEM

stipulated that the parties would initially try this

case as to IDEM’s liability for Raybestos’ alleged

damages through September 20, 2003 and address

post-September 20, 2003 damages after the Court en-

tered judgment on Raybestos’ initial claim. Following

App. 34

the June 12 Judgment, Raybestos moved to join the

issue of post-September 20, 2003 damages with the

attorney fee hearing. The Court granted that motion

and evidence was presented on both issues on

September 8, 2006.

The parties stipulated additional evidence into

the record, including invoices for the costs Raybestos

claims as additional damages and a chart itemizing

and classifying Raybestos’ claimed attorney fees.

Raybestos presented three witnesses and additional

documents. IDEM called one witness.

The Court enters the following findings of fact

and conclusions of law:

1. Raybestos’ environmental contractor for the

Shelly Ditch cleanup is Exponent. Since September

20, 2003, Exponent billed $398,465.22 in performing

EPA-mandated environmental work at Raybestos’

Crawfordsville facility and Shelly Ditch. Of this

figure, $209,903.83 relate exclusively to the Shelly

Ditch cleanup and should be recovered by Plaintiff in

this action.

2. In addition, during the period from October

14, 2003 through August 14, 2004, Raybestos in-

curred $11,634.94 in remediating PCB contamination

at Shelly Ditch in response to the demands of the

United States Environmental Protection Agency

(“EPA”), which do not include costs invoiced by Expo-

nent and the Wildman Harrold law firm.

App. 35

3. The cleanup of Shelly Ditch has not yet been

completed.

4. Additional cleanup is being required by EPA

in two parts of Shelly Ditch: “Reach 4” (downstream

from Reaches 1-3 and closer to Sugar Creek) and the

Railroad and Culvert Area (“RR & CA”) (immediately

downstream of Raybestos’ outfall at the beginning of

Reach 1).

5. Mr. Brugger is a Senior Environmental

Engineer at Exponent with a long history of conduct-

ing environmental cleanups and is an expert in

estimating the costs of performing environmental

remediation.

6. EPA’s Superfund Section is requiring addi-

tional cleanup of PCBs and lead in Reach 4.

7. Mr. Brugger currently estimates that Raybes-

tos will incur $1,774,711 in future costs for cleanup of

Reach 4. These costs include $1,443,711 in remedial

costs, $88,000 in pre-remedial costs (including report

preparation, design and coordination with EPA) and

$243,000 in EPA oversight costs.

8. Cleanup of Reach 4 should be completed by

December 2007.

9. Based on all of this evidence, the Court finds

that the future costs of EPA-mandated cleanup in

Reach 4 of Shelly Ditch will be at least $1,774,711.

These costs, like the other costs imposed by EPA for

the cleanup of Shelly Ditch, are a result of IDEM’s

App. 36

repeated solicitations for EPA involvement in breach

of the Agreed Order.

10. EPA also is requiring additional cleanup of

PCBs and lead at the RR & CA.

11. Enforcement efforts by EPA at the RR & CA

include EPA’s Superfund Section.

12. The RR & CA includes an active railroad

spur that is used to service a number of businesses in

Crawfordsville. This area was previously addressed

as part of Reach 1 of Shelly Ditch under EPA’s De-

cember 6, 2000 Unilateral Administrative Order

(“UAO”). However, some PCBs were left in the ground

in the RR & CA and the area was covered with a

concrete cap.

13. In Order to remediate the remaining PCBs

at the RR & CA, Exponent will need to excavate the

area including the concrete cap and drive sheet metal

vertically into the ground to stabilize the banks of

Shelly Ditch and the perimeter of the excavation.

This process will make the existing railroad spur

potentially unstable and require that it not be used

during the period of the excavation.

14. Based on discussions with EPA, Mr. Brug-

ger testified that he expects the cleanup goal for the

RR & CA to be 10ppm for PCBs, as it has been along

the rest of Shelly Ditch. The actual levels of PCBs

that are allowed to remain in this area will depend on

the specifics of where the PCBs are located and how

App. 37

difficult it is to remove them without destroying the

existing railroad spur.

15. The court finds that the cost of future work

at the RR & CA area will be $2,287,999.00 which

includes $257,000 for EPA oversight costs.

16. Cleanup of the RR & CA should be com-

pleted by April 2008.

17. The Court finds that the future costs of

EPA-mandated cleanup in the RR & CA of Shelly

Ditch will be at least $2,287,999.00. These costs, like

the other costs imposed by EPA for the cleanup of

Shelly Ditch, arise from IDEM’s repeated solicitations

for EPA to force a more expensive cleanup in Shelly

Ditch, in breach of the Agreed Order.

18. The Court finds that Raybestos has in-

curred an additional $304,584.45 in attorney fees

through the Indianapolis law firm of Plews Shadley

Racher and Braun (“PSRB”) during the relevant

period of time in an effort to defend against enforce-

ment action by the EPA under CERCLA. program

resulting from IDEM’s breach of the parties’ settle-

ment and the Agreed Order. Raybestos has argued

that an additional $56,782.20 in attorney fees that

were incurred to resist enforcement efforts brought

under EPA program areas other than the Superfund

Section should also be recoverable. The Court finds

that the Plaintiff has failed to carry its burden of

proof on this point, despite the lack of evidence pre-

sented by IDEM on this issue.

App. 38

19. Raybestos also seeks $23,519.61 in PSRB

attorney fees and expenses that the parties catego-

rized as “bankruptcy” related. The Court finds that

these fees were not reasonably related nor necessary

to resolution of this underlying breach of contract and

resulting environmental clean up matter and, there-

fore, the Court finds these fees are not recoverable.

20. The sole entry in the “other” column of Stip.

Exh. 253 is a $7,319.55 entry on PSRB invoice No.

16756. Raybestos introduced backup documentation

for this entry in the form of an invoice from the

environmental contractor, Exponent. This expense

related to an ecological risk assessment performed in

anticipation of a claim for Natural Resources Dam-

ages (“NRD”) under CERCLA. Again, the Court finds

that the Plaintiff failed to carry its burden of proof

that this expense was incurred in defending against

the EPA actions that resulted from IDEM’s breach otf

the Agreed Order.

21. The Chicago law firm of Wildman, Harrold,

Allen & Dixon, LLP (“Wildman Harrold”) invoiced

Raybestos $78,693.83 for attorney fees and expenses

that the Court finds are reasonable and relate to the

EPA’s Shelly Ditch enforcement actions that resulted

from IDEM’s breach of the Agreed Order.

22. Mr. Madonia estimated that his firm’s

billings through April 2008 would total $49,164.28.

The Court finds that it is more likely than not that

Raybestos’ future legal costs relating to the EPA’s

Shelly Ditch enforcement action, which the Court has

App. 39

previously found was caused by the breach of the

Agreed order, will total at least $49,164.28.

Judgment

~The Court, having heard and considered the

evidence and facts described above, now concludes as

follows:

A. Additional damages resulting from IDEM’s

breach.

1. The Court incorporates all of its Findings of

Fact and Conclusions of Law contained in the June

12, 2006 Judgment as though specifically set forth

herein.

2. The Court finds that Raybestos has incurred

additional costs, since September 20, 2003, in per-

forming the EPA-mandated cleanup of Shelly Ditch in

the amount of $221,538.77. IDEM’s breach of the

Agreed Order was, at least, a substantial factor in

causing these damages.

3. The EPA-mandated cleanup of Shelly Ditch is

not yet completed. The Court finds that the future

cost to Raybestos of EPA-mandated cleanup of Shelly

Ditch will be at least $4,062,710. This figure includes

$1,774,711 for the cleanup of Reach 4 plus

$2,287,999.00 for the cleanup of the RR & CA.

IDEM’s breach of the Agreed Order was, ai least, a

substantial factor in causing these damages. Cleanup

App. 40

of the Ditch will not be completed until at least April

2008.

B. Attorney Fees.

4. As discussed in the June 12, 2006 judgment,

the Court is mindful of the holding in Masonic Temple

Association of Crawfordsville v. Indiana Farmers

Mut. Ins. Raybestos incurred $304,584.45 in attorney

fees through PSRB and $78,693.83 through the

Wildman Harrold firm in defending against the EPA

actions and overseeing EPA-mandated cleanup di-

rectly related to the breach of the Agreed Order.

5. Raybestos will continue to incur attorney fees

in defending against the EPA actions, and overseeing

EPA-mandated cleanup, at Shelly Ditch through April

2008. Raybestos’ future legal costs relating to the

EPA’s Shelly Ditch enforcement action will total at

least $49,164.28.

WHEREFORE, the Court finds that Raybes-

tos has proven additional damages, since September

20, 2003, in the amount of $4,716,691.33. The Court

enters judgment in Raybestos’ favor in the total

amount of $4,716,691.33. This judgment is in addi-

tion to the $11,645,321.58 awarded in the Court’s

June 12 Judgment.

Dated: 10/30/06 /s/ Robyn L. Moberly

Honorable Robyn Moberly,

Judge

Marion County Superior

Court, Civil Division 12

App. 41

Copies to:

George M. Plews (Atty. No. 6274-49)

Brett E. Nelson (Atty. No. 22096-53)

PLEWS SHADLEY RACHER & BRAUN

1346 North Delaware Street

Indianapolis, IN 46202-2415

Telephone: (317) 637-0700

Fax: (317) 637-0710

Timothy J. Junk

Deputy Attorney General

Indiana Department of Environmental Management

100 N. Senate Ave., MC 60-1

Ind. Gov. Cent. North, 1307

Indianapolis, IN 46204

Telephone: (317) 232-6247

App. 42

STATE OF ) IN THE MARION COUNTY

INDIANA ) SUPERIOR COURT

)SS:

COUNTY OF ) CAUSE NO.

MARION ) 49D12-0209-PL-001553

RAYBESTOS PRODUCTS

COMPANY,

)

Plaintiff,

Vv. )

THE INDIANA )

DEPARTMENT OF

)

ENVIRONMENTAL

MANAGEMENT,

Defendant.

JUDGMENT ENTRY

(Filed Jun. 12, 2006)

On July 26, 2002 Plaintiff, Raybestos Products

Company, (“Raybestos”) filed this suit against the

Indiana Department of Environmental Management

(“IDEM”) alleging breach of contract and seeking

declaratory relief. The case arises out of an alleged

breach of an Agreed Order dated February 28, 1997

between Raybestos and IDEM concerning investiga-

tion and cleanup of polychlorinated biphenyls

(“PCBs”) and lead in an area known as Shelly Ditch

in Crawfordsville Indiana. Raybestos alleges that

IDEM repeatedly asked the United States Environ-

mental Protection Agency (“EPA”) to step in and do

what IDEM could not do under the Agreed Order:

App. 43

force Raybestos to perform a cleanup different than

the cleanup required by IDEM’s Agreed Order. EPA

eventually did so. The cost of the cleanup was sub-

stantially higher than the cost of the cleanup Raybes-

tos expected to perform under the Agreed Order.

Raybestos seeks these increased costs as damages in

this action.

The IDEM alleges that the Raybestos site con-

tained high levels of PCB’s as would adversely affect

human health or the environment from pollution or

contamination. IDEM further alleges that the Agreed

Order between IDEM and Raybestos contemplated

the adoption of a Baseline Risk Assessment. The Risk

Assessment entered into between the parties was an

error on the part of IDEM and did not adequately

protect human health and the environment. There-

fore, IDEM sought the intervention of the EPA to

exercise jurisdiction and force a different clean up.

IDEM contends that it had the right to actively seek

the intervention of the EPA and that eventually the

EPA would have forced a clean up higher than the

Risk Assessment indicated was necessary and, there-

fore, there were no damages suffered by Raybestos.

On July 6, 2004, the Court granted in part and de-

nied in part the parties’ cross motions for summary

judgment (“July 6 Order”). In its July 6 Order, this

Court found that the “Agreed Order is a settlement

agreement, a contract”; IDEM’s requests for EPA

intervention were a breach of contract as a matter

of law; IDEM had a legal duty to abide by its

agreement with Raybestos and to take no actions

App. 44

contrary thereto, and “IDEM’s statutory ability . . . to

seek the intervention of the EPA was not a justifica-

tion for its breach of the Agreed Order”. The Court

reserved for trial the question of whether IDEM’s

requests to EPA were a substantial factor in bringing

about EPA’s involvement in the Shelly Ditch cleanup

and, ultimately, its issuance of a Unilateral Adminis-

trative Order (“UAO”) to Raybestos requiring a much

more expensive cleanup.

A six-day bench trial was held on August 2-3,

November 14-15 and December 28, 2005 and January

19, 2006. The parties stipulated substantial evidence

into the record, including deposition testimony, in-

voices for the costs Raybestos claims as damages,

various written communications within and between

EPA and IDEM and numerous other documents. In

addition, the parties stipulated that the issue of

damages at trial would be confined to IDEM’s liability

for Raybestos’ damages through September 20, 2003

and that the issue of damages accruing after Septem-

ber 20, 2003, if any, will be reserved for resolution at

a later date.

Having heard witnesses and received evidence,

the Court enters the following findings of fact and

conclusions of law:

I. Findings of Fact.

1. In 1951, Raybestos of Manhattan, Inc., began the

manufacturing of friction products for the auto-

motive industry, such as brakes and clutches, in

App. 45

Crawfordsville, Indiana. From 1982 through 1987,

the Crawfordsville facility was owned by Ray Mark

Industries, and since 1987 it has been owned and

operated by the Raybestos Products Company.

2. Raybestos’ manufacturing plant is adjacent to

Shelly Ditch. Surface water from the Raybestos

manufacturing facility flows through an on-site

culvert and into the adjacent Shelly Ditch. About a

mile downstream, Shelly Ditch empties into the

Sugar Creek. Shelly Ditch is approximately 5000 feet

in length and begins by the east edge of the railroad

tracks on the west side of the Raybestos manufactur-

ing facility. Shelly Ditch is an open earthen drain

bordered by the backyards of 17 homes, a school, a

fairgrounds, and a swimming pool.

3. In 1995, PCB’s were found in Shelley Ditch.

IDEM contacted Raybestos about the PCBs discov-

ered in Shelly Ditch, and, in 1996 Raybestos began an

investigation. Raybestos learned that in 1967 its

corporate predecessor had purchased and used an

hydraulic oil that contained a specific type of PCB

known under the brand name “Pydraul F-9.” Pydraul

F-9 was heavier than water and contained one spe-

cific PCB Aroclor. Raybestos traced its PCBs from the

oil spills on the floor of the tunnels under the furnace

lines, to a sump which pumped to an 18-inch culvert,

which then discharged into Shelly Ditch. Surface

rainwater also flowed into the 18-inch culvert, and

Raybestos believed that each rain event would wash

residual PCBs into Shelly Ditch. In 1996, Raybestos

also excavated the 18-inch culvert and replaced the

App. 46

section of fitted drain tile closest to the discharge into

Shelly Ditch.

4. On June 13, 1996, IDEM sent Raybestos a “Spe-

cial Notice of Potential Liability” regarding Shelly

Ditch. Mark Jaworski, IDEM’s Project Manager in

Site Investigations, prepared a Memorandum of

Decision to the EPA recommending that Shelley Ditch

receive a high priority on the Superfund Hazard

Ranking system. On September 30, 1996, Jan Pels

(Early Action Project Manager, Region V, EPA) made

a “Remedial Site Assessment Decision” assigning

Raybestos a “low priority” and noting that the “State

is negotiating [an] order for cleanup.”

5. The EPA Superfund Division generally defers to

cleanup efforts by a state or another federal program,

and will not take action on a site if the human health

and environmental threats posed by that site are

being addressed through enforcement efforts by a

state (such as Indiana).

6. On February 28, 1997, IDEM and Raybestos

entered an Agreed Order pursuant to Indiana Code

§13-25-4-23. Among other things, the Order required

Raybestos to remove and dispose of the PCB’s and

take any “actions necessary to monitor, assess and

evaluate the continuing effectiveness” of the removal

of the PCB’s from Shelly Ditch.

7. Attached to the Agreed Order for Removal is a

Statement of Work which describes the purpose of the

removal action as follows:

App. 47

I. PURPOSE

The purpose of this Removal Action (RA) is

to investigate the nature and extent of im-

pacts at the Shelly Ditch site and to develop,

evaluate, and implement alternatives, as ap-

propriate. The objective of the RA will be to

address human health and environmental

concerns and bring the site to closure such

that no further actions are required.

8. The parties also agreed that the Agreed Order for

Removal would take precedence over any conflict that

might arise with either the Statement of Work or the

approved Removal Work Plan. In Paragraph 14 of the

Agreed Order for Removal, Raybestos promised that

“the activities conducted by the Respondent shall be

consistent with the requirements of the National Oil

and Hazardous Substance Pollution contingency

Plan, U.S. EPA guidance documents, and all applica-

ble laws.”

9. The Agreed Order provided for alternative dis-

pute resolution if a disagreement occurred between

IDEM and Raybestos during the process of developing

of plans, obtaining a risk assessment, engineering

evaluations, technical memorandum, implementation

and completion of the project.

10. A dispute did occur between IDEM and Raybes-

tos when IDEM decided that the Risk Assessment it

had previously approved was approved in error and,

therefore, all subsequent actions taken, including the

App. 48

written Agreed Order signed by the then-Commis-

sioner of IDEM were repudiated by IDEM.

11. For reasons not explained through testimony,

IDEM never sought resolution of its dispute under

the process provided in the Agreed Order.

12. Whether the Baseline Risk Assessment, the

Technical Memorandum, and Statement of the Work

fully insured human health and the environment is

not known by this court and is not an issue in the

present case.

13. On March 16, 1998, after 15 months of review

both by its staff and an outside risk assessment

contractor, IDEM did approve Raybestos’ Risk Assess-

ment.

14. Raybestos paid for the preparation and submis-

sion of a Technical Memorandum. IDEM’s staff sug-

gested a “hot spot” cleanup to remove all PCB’s toa

maximum remaining concentration of 238 ppm in the

worst areas. Ultimately, on November 30, 1998,

IDEM “withdrew” its approval of the Risk Assess-

ment.

15. In response to IDEM’s withdrawal of approval,

Raybestos went through the administrative appeal

process. Ultimately Raybestos obtained a judgment

from a Marion Superior Court finding that IDEM

“arbitrarily withdrew approval of the Risk Assess-

ment, although there was nothing wrong with the

report. The agency then used the withdrawal of

approval as the basis for disapproving the Technical

App. 49

Memorandum ... IDEM did not rely on any site-

specific evidence about the Shelly Ditch ... IDEM

acted arbitrarily.”

16. On June 1, 2002, the court ordered IDEM to

reinstate the approval of the Risk Assessment and

the approval of the Technical Memorandum. IDEM

never appealed the decision of the Marion Superior

court. and by letter dated September 14, 2001; IDEM

eventually approved and reinstated the Baseline risk

Assessment for Shelly Ditch and the Technical Memo-

randum.

17. On July 14, 1998, two months after the submis-

sion of the Technical Memorandum, Raybestos’ con-

tractor asked the US Fish & Wildlife Service for a

critical habitat review in the vicinity of Shelly Ditch.

The letter acknowledges that this review was re-

quested as part of an ecological screening assessment

required by an Agreed Order between Raybestos and

the Department.

18. The US Fish & Wildlife Service responded by

letter dated August 25, 1998, and identified Shelly

Ditch as within the range of the Federally endan-

gered Indiana bat, and the Federally threatened bald

eagle. A portion of Sugar Creek in Montgomery

County is considered a primary wintering area for

eagles in Indiana.

19. Raybestos responded to the issues present by

the US fish & Wildlife Service by stating that the

issues pertaining to the Ecological Screening Assess-

ment Report were being addressed in a separate

App. 50 |

document, and that subsequent revisions to the

Technical Memorandum should be deferred until the

comments on the Ecological Screening Assessment

Report were fully addressed.

20. In 1998, IDEM experienced a change in top

administration and John Hamilton became the new

commissioner. Mr. Hamilton visited Crawfordsville in

late August 1998 and very publicly promised resi-

dents that Shelly Ditch would be cleaned up

promptly.

21. On September 22, 1998 an internal IDEM

memorandum was prepared and circulated among

the top administrators at IDEM. The memorandum

discusses the “impasse” perceived by IDEM and lays

out options for IDEM to pursue to force Raybestos to

adopt a different cleanup level. These options in-

cluded: resolution through the Agreed Order’s dispute

resolution provisions; “[e]ncourag{ing] EPA to pursue

cleanup and enforcement through TSCA/RCRA.”; and

“{plursu[ing] National Priority Listing by scoring both

the Sugar Creek and Shelly Ditch.” According to that

memorandum, placement of Sugar Creek on the NPL

(National Priority List) “would allow IDEM to pursue

the PCB contamination in both Shelly Ditch and

Sugar Creek.” The memorandum outlines with consi-

derable precision the steps IDEM subsequently took

to involve EPA.

22. Catherine Gibbs, the IDEM lawyer who nego-

tiated the Agreed Order and IDEM employee Harry

Atkinson asked a member of IDEM’s RCRA group,

App. 51

Don Stilz to assist in compelling Raybestos to conduct

a cleanup different than the one IDEM and Raybestos

had developed under the Agreed Order. Mr. Stilz

made efforts to get the Raybestos site re-ranked

under the National Corrective Action Prioritization

System (“NCAPS”). He believed that re-ranking

would allow IDEM to require a cleanup standard

significantly lower than ti:e 238 ppm standard al-

ready approved by IDEM.

23. In mid-October, 1998, IDEM’s Mike Sickels, Don

Stilz’ supervisor, had a telephone conversation with

EPA as to whether EPA would consider assigning a

higher RCRA priority to Raybestos Products Com-

pany and discussed this information with Don Stilz.

24. By e-mail dated October 15, 1998, Mr. Stilz

advised Catherine Gibbs that IDEM might be able to

get Raybestos ranked as a “high” priority under

RCRA.

25. On October 16, 1998, Mr. Stilz provided a draft

memorandum to Harry Atkinson regarding how to get

EPA to re-rank and Stilz’ supervisor, Mike Sickels,

sent an e-mail noting the difficulties in getting EPA to

rescore a site as a high priority.

26. On October 29, 1998, Don Stilz circulated an

Office Memorandum advising that EPA’s RCRA

section had ranked Raybestos as a “low priority” site

and noting that IDEM’s “problem” was how to get

EPA to re-rank Raybestos. Mr. Stilz prepared this

memorandum in response to the phone call that he

received from Harry Atkinson and Catherine Gibbs

App. 52

regarding the authority of IDEM’s Corrective Action

section to compel a cleanup different than the one

agreed to pursuant to the Agreed Order.

27. The October 29 memorandum states that “EPA

is very reluctant to “create” more high priorities for

the Corrective Action program” and suggests that

“the only chance we have to achieve the re-ranking

we desire is to have [IDEM] Commissioner Hamilton

personally request Director Robert Springer, Waste,

Pesticides and Toxics Division, U.S. EPA, Region 5 to

do so.”

28. On November 4, 1998, IDEM sampled the

outfall from Raybestos’ plant into Shelly Ditch for the

third time without the presence of Raybestos. PCBs

were detected at 3.5, 2.5, .4 and .15 parts per billion

detection limits in four of the seven samples it tested.

The presence of the opposing party at a sampling was

a contractual requirement of the Agreed Order. [IDEM

seems to argue that they now have information that

Raybestos sampled its own soil without the presence

of IDEM and, therefore, it excuses IDEM from com-

plying with the contract requirement to offer the

other party an opportunity to participate in sampling.

Since IDEM used the test results of the sampling

(outside the presence of Raybestos) as a reason to

coerce or entice the EPA into “over filing” it is of far

greater concern that this sampling was done “on the

sly”.

29. Mr. Stilz contacted EPA employee Kendal Moore

on November 9, 1998 to advise EPA of the sampling

App. 53

results from Raybestos’ outfall and request that EPA

conduct a TSCA facility inspection at Raybestos.

30. On November 10, 1998 IDEM issued a press

release regarding Raybestos’ alleged “illegal dump-

ing” of PCBs into Shelly Ditch. At a public meeting

that same day, IDEM announced to Crawfordsville

residents that it intended to “withdraw” approval of

Raybestos’ Risk Assessment.

31. On November 16, 1998, Raybestos sent a noti-

fication of dispute to IDEM pursuant to the dispute

resolution provisions of the Agreed Order. |

32. On December 3, 1998, in response to a call from

IDEM employee Don Stilz, EPA’s TSCA section per-

formed a TSCA inspection at Raybestos. According to

the inspection report, four IDEM employees and two

EPA employees were present at that inspection.

33. EPA’s TSCA group did not have any interest in

Raybestos prior to Stilz’7 November 1998 call.

34. On March 12, 1999, IDEM’s Section Chief for

Solid Waste Enforcement, Paul Higgenbotham, sug-

gested that IDEM’s Deputy Commissioner, Bruce

Palin, and Assistant Commissioner, Mary Beth Tuohy

“contact| |] EPA Region 5 Senior Staff to help expedite

EPA’s decision making and coordination involving

Raybestos.” The “decision making” referenced in this

memorandum refers to how EPA could use its author-

ity to force Raybestos to clean up Shelly Ditch as

requested by IDEM.

App. 54

35. On March 22, 1999, in response to an internal

IDEM inquiry about the remedy for the Raybestos

site, [DEM’s project manager sent an e-mail reporting

that “[wje are in the process of contacting EPA to find

out if they will commit to some level of involvement —

now and in the future.”

36. At a March 1999 meeting, IDEM expressed to

EPA its “desire to have EPA assume some “bad cop”

role in their discussions with Raybestos thus pressur-

ing them to some more final cleanup at least for

Shelly Ditch ... using the threat of NPL listing and

or an imminent removal should Raybestos not be

moved.” EPA’s e-mail notes that “(t]he Shelly Ditch

problem has become a bit more high profile recently

due to an IDEM commissioner visit last year that

promised cleanup actions to begin this Spring.” The

EPA was aware of the recent sampling at the out fall

which found measurable PCB’s and that a RCRA

corrective action order was in place for lead remedia-

tion on the facility. As of March 1999, the Shelly Ditch

issue was clearly known by the EPA as the result of

actions by IDEM.

37. Raybestos was aware that EPA had the right to

over-file to compel a more stringent cleanup than that

proposed by Raybestos. Raybestos accepted the “risk”

that the EPA would over-file when it signed the

Agreed Order with IDEM. However, Raybestos did

not accept the “risk” that IDEM would instigate,

encourage, facilitate and insist upon the EPA over-

filing.

App. 55

38. On April 1, 1999, the Department’s Project

Manger [sic] Angelo Dattilo met with Raybestos’

environmental consultant, Michael Kasnick. Kasnick

advised Dattilo that he was preparing a work plan for

Shelly Ditch based upon a cleanup target of 238 ppm.

Kasnick was aware that even if the Department

approved the work plan, EPA could over-file and

require any additional work necessary to meet EPA’s

regulatory standards.

39. IDEM was, in fact, using the threat of EPA

involvement and NPL listing to encourage Raybestos

to agree to a cleanup of Shelly Ditch different than

the cleanup it agreed to pursuant to the Agreed

Order. It is unknown why IDEM did not attempt

Alternative Dispute Resolution under the Agreed

Order.

40. Shelly Ditch first came to the attention of EPA’s

RCRA group in March of 1999 through a contact by

Joe Dufficy of EPA Region V’s Superfund section due

to IDF\M’s requests.

41. EPA’s RCRA group was not involved with Shelly

Ditch prior to March of 1999, when it began develop-

ing a GPRA baseline for 2005.

42. Raybestos was not initially listed under GPRA

but was included in the GPRA baseline because

IDEM asked EPA to exercise its discretion to add the

facility to the list.

43. An April 5, 1999 IDEM e-mail from its project

manager notes that Raybestos was “forcing the issue

App. 56

and making IDEM decide what is right for the IDEM

society.” The e-mail notes that if IDEM were to ap-

prove an amended work plan it expected to receive

from Raybestos, Raybestos was “willing to allow EPA

to overfile and deal with them for any future action —

which we know may not be likely.”

44. Another IDEM e-mail, dated April 9, 1999, notes

that EPA’s RCRA Corrective Action Project Manager,

Gerry Philips, indicated that “since this [Raybestos]

site is a low priority, he [Philips] had no plans to

address it at this time.”

45. IDEM expected that the Sugar Creek Sediment

Site was going to be listed on the NPL and that

Shelly Ditch would then be addressed by EPA.

46. A May 11, 1999 internal EPA e-mail notes that

the Raybestos site is “A low priority for CA [Correc-

tive Action] under RCRA” but that IDEM’s “super-

fund people want to refer cleanup of Shelly Ditch ...

and Sugar Creek to us for possible NPL listing.” The

e-mail notes that IDEM’s Assistant Commissioner,

Mary Beth Tuohy, was asking about EPA’s potential

involvement on a weekly basis.

47. EPA’s Office of Regional Counsel assigned an

attorney to the Shelly Ditch matter on September 8,

1999. The assignment form notes that “This was a

state-led case. IDEM has asked for federal assistance

with this recalcitrant facility.” IDEM was actively

soliciting, encouraging, and insisting upon EPA

involvement in the clean up of the Raybestos/Shelly

Ditch site. Although it is unknowable whether the

App. 57

EPA would have ever involved itself in the Shelly

Ditch clean up, the evidence is voluminous and over-

whelming that the EPA would not have gotten in-

volved in the clean up when it did or any time in the

foreseeable future, but for the efforts of IDEM.

48. On October 29, 1999, EPA accepted IDEM’s

referral, confirmed that EPA’s addition of Raybestos

to the GPRA Corrective Action baseline “despite the

low NCAPS ranking” was made possible “[blased on

the updated information that [IDEM] provided” and

agreed to “use all of its authorities to address this

matter promptly.”

49. The Sugar Creek Sediment Site would not have

been slated for a site assessment team if IDEM had

not proposed the site to EPA.

50. On December 15, 1999, EPA and IDEM held a

public meeting for citizens of Crawfordsville. At this

meeting, IDEM told the public that EPA was involved

in Shelly Ditch because IDEM requested its assis-

tance. EPA confirmed at the December 15, 1999

public meeting that it was involved in Shelly Ditch

because IDEM requested its assistance.

51. On December 6, 2000, EPA issued a Unilateral

Agreed Order (“UAO”) requiring Raybestos to clean

up Shelly Ditch.

52. EPA’s Superfund Director William Muno testi-

fied that EPA thought that IDEM “had been unable to

compel Raybestos to cleanup Shelly Ditch,” and that

IDEM “was giving up on its efforts” to cleanup Shelly

App. 58

Ditch and, therefore, that “any further deferral to

Indiana’s ongoing enforcement efforts would not be

warranted.”

53. Mr. Muno was unaware of the Agreed Order.

54. Generally, if a state agency like IDEM is super-

vising a cleanup and they are the lead agency and the

cleanup is proceeding, there isn’t any reason why

Superfund would get involved.

55. EPA would have been reluctant to get involved

at a state-led sight [sic], particularly when it had not

previously been involved.

56. EPA Region V’s Superfund Director at the time,

Mr. William Muno, was not aware of a single instance

where EPA has interceded after the completion of

cleanup according to an agreed order between the

state and the respondent.

57. IDEM requested that EPA issue the UAO.

58. EPA’s Superfund Director, Ric Karl, was un-

aware of any citizens group tracking the cleanups in

Shelly Ditch or the Sugar Creek Sediment Site

59. As stated above, on June 1, 2001 Judge Keele

issued his Final Order finding that IDEM’s with-

drawal of approval of Raybestos’ Risk Assessment and

disapproval of Raybestos’ technical memorandum

were “arbitrary and capricious and unsupported by

substantial evidence.” The Final Order found that

IDEM had breached the Agreed Order, that Raybes-

tos was prejudiced by IDEM’s breach and that

App. 59

approval of the Risk Assessment should be reinstated

and the Technical Memorandum should be approved.

60. IDEM did not comply with the Final Order, and

on September 10, 2001 Judge Keele entered an order

compelling IDEM to reinstate approval of the Risk

Assessment and approve the Technical Memorandum.

61. On September 10, 2001 IDEM sent a letter

purporting to comply with Judge Keele’s Final Order.

62. There were reasons that the EPA could have or

might have eventually initiated enforcement actions

against the Plaintiff, but the Court is unconvinced

that there was any other factor in the EPA’s involve-

ment other than the persistent insistence of IDEM.

63. IDEM’s communications to EPA regarding

Shelly Ditch were not done in the ordinary course

of business. IDEM mounted a planned, organized,

persistent campaign to use EPA to force a different

cleanup.

64. The EPA’s enforcement action was not due to

possible NPL listing of the Sugar Creek Sediment

Site or any pre-breach communication by IDEM.

65. IDEM argued that its employee, Don Stilz,

contacted EPA’s TSCA group to report water samples

and that this “legitimate” communication could have

caused EPA enforcement under RCRA or TSCA.

However, there is no evidence supporting this specu-

lation. Further, Mr. Stilz’s communication with TSCA

was after IDEM had already made threats to try to

involve the EPA’s authority to force a clean up. EPA's

App. 60

TSCA group did not have any interest in Raybestos

prior to Stilz’s call.

66. EPA’s RCRA group was not involved with Shelly

Ditch prior to March of 1999, when it began develop-

ing a GPRA baseline for 2005. Raybestos was not

initially listed under GPRA but was included in the

GPRA baseline because IDEM asked EPA to exercise

its discretion to add the facility to the list. There is no

evidence that the UAO resulted from any EPA TSCA

or RCRA action.

67. Independent action by EPA — that is, action not

related to IDEM’s improper solicitations — under

TSCA or RCRA was not a substantial factor in EPA’s

involvement in the Shelly Ditch cleanup.

68. The projected costs of Raybestos’ cleanup of

Shelly Ditch under the Agreed Order it entered with

IDEM was $2,367,516.

69. The cost of the cleanup Raybestos was required

to perform under the UAO was $14,012,837.58,

excluding all attorney fees. $2,367,516.00 would have

been incurred if IDEM had not breached the agree-

ment between the parties, causing EPA to initiate

federal enforcement action. The increased costs to

Raybestos of cleaning up Shelly Ditch to the level

required by the EPA was $11,645,321.58.

App. 61

II. Conclusions of law.

The Court, having heard and considered the

evidence and facts described above, now concludes as

follows:

“The essential elements of a breach of contract

action are the existence of a contract, the defendant’s

breach thereof, and damages.” Nieto v Kezy, 846

N.E.2d 327 (ind. Ct. App. 2006), citing Rogier V

American Testing and Engineering Corp., 734 NE2d

606 (Ind. Ct. App. 2000), reh’g denied, trans. denied.

To succeed on breach of contract claim, the plain-

tiff bears the burden of proving that defendant's

breach of contract was a “substantial factor” contri-

buting to plaintiff ’s damages. Holloway v. Bob Evans

Farms, Inc., 695 N.E.2d 991 (Ind. Ct. App. 1998) and

Fowler v. Campbell, 612 N.E.2d 596 (Ind. Ct. App.

1993).

“(T)he test of causation in common law contract

actions is not whether the breach was the only cause,

or whether other causes may have contributed, but

whether the breach was a substantial factor in bring-

ing about the harm.” Fowler. Supra, at 602.

“Indiana does not recognize comparative causa-

tion.” Parke State Bank v. Akers, 659 N.E.2d 10381.

1034-35 (Ind. 1995).

The Court finds that Raybestos met its burden of

showing that IDEM’s repeated requests to EPA to

initiate an enforcement action were at least a sub-

stantial factor in EPA’s involvement in the Shelly

App. 62

Ditch site and issuance of the UAO. There is virtually

no evidence that EPA became involved in the Shelly

Ditch cleanup for any reason other than IDEM’s

persistent and repeated requests that EPA do so. As

of the date of trial, the Sugar Creek Sediment Site

still had not been listed as an NPL site, despite the

efforts of IDEM.

As set forth above, Raybestos is seeking to re-

cover the difference between the cost of the cleanup

that would have resulted from the Agreed Order and

the cost of the cleanup it ultimately performed under

the UAO. The Court has carefully reviewed the

invoices and IDEM’s written objections to the in-

voices. The Court finds that the estimated cost of

Ravbestos’ cleanup of Shelly Ditch under the Agreed

Order it entered with IDEM was $2,367,516. The cost

of the cleanup Raybestos was required to perform

under the UAO was $14,012,837.58, excluding all

attorney fees. The difference between these figures is

$11,645,321.58.

The Court previously granted IDEM’s motion for

summary judgment on the issue of whether Raybes-

tos could recover any portion of its attorney fees as

damages in this action. Raybestos argued that attor-

ney fees related to defending and responding to the

EPA action brought about by IDEM’s breach were

consequential damages. However, the Court found

that Raybestos had not shown any reason why the

American Rule should not apply and held that Ray-

bestos could not recover attorney fees in the event it

prevailed.

App. 63

Raybestos argues that Masonic Temple Associa-

tion of Crawfordsville v. Indiana Farmers Mut. Ins.,

837 N.E.2d 1032 (Ind. Ct. App. 2005) (re hearing

denied March 7, 2006) mandates that this court

reconsider its partial summary judgment ruling that

the American Rule for the recovery of attorney fees in

litigation should apply in this case. The decision in

Masonic Temple was published during the pendency

of this case. In Masonic Temple, the Indiana Court of

Appeals adopted the third-party litigation exception

to the American Rule that attorney fees are not

recoverable by a prevailing party. The elements

necessary to apply this exception are: (1) the plaintiff

became involved in a legal dispute because of the

defendant’s breach of contract or other wrongful act;

(2) the litigation was with a third party and not the

defendant; and (3) the fees were incurred in that

third-party dispute. Jd. The Court orders that attor-

ney fees incurred in responding to the EPA action,

only, are compensable as foreseeable consequential

damages of the breach. Raybestos may not collect any

of the attorney fees incurred in the first Marion

Superior Court (environmental court) action before

Judge Keele nor in the present action against IDEM.

Raybestos has been over-reaching in its request

for fees in this action. Raybestos has not limited its

request to attorney fees reasonably incurred in its

legal representation of Raybestos in dealing with the

third party, the EPA, and over-seeing compliance with

the UAO. Therefore, this Court declines to accept the

argument that Masonic Temple applies to all fees

App. 64

requested by Raybestos. The Court has attempted to

review the evidence as it was presented to this Court

with regard to the attorney fees of Plews Shadley

Racher and Braun. The invoices include many entries

that are unclear as to which legal matter (versus

IDEM or overseeing the EPA enforcement action) the

fee is related. Therefore, this Court has no alternative

but to set this matter for proceedings confined to the

issue of allocation of attorney fees between these two

matters.

Raybestos argues it is entitled to collect prejudg-

ment interest on its damages for breach of contract

against the state. However, unless a state has waived

its sovereign immunity by expressly consenting to

suit through a “clear declaration” of that consent, it is

not subject to suit in its courts. Coll. Sav. Bank v. Fla.

Prepaid Postsecondary Educ. Expense Bd., 527 U.S.

666, 680, 119 S.Ct. 2219, 2228, 144 L.Ed.2d 605

(1999). Indiana has consented to suits against the

State for breach of contract pursuant to Indiana Code

§ 34-13-1-1. There is no provision therein that pro-

vides for liability on the part of the State for prejudg-

ment interest and, therefore, this Court finds that

prejudgment interest is not recoverable against the

State in a breach of contract action. However, the

State has consented to post judgment interest under

the provisions of Indiana Code § 34-13-1-6:

App. 65

Judgments against state; interest rate;

appropriation to pay judgment

Sec. 6. Whenever, by final decree or

judgment, a sum of money is adjudged to be

due any person from the state, an execution

shall not issue but the judgment shall draw

interest at an annual rate of six percent (6%)

from the date of the adjournment of the next

ensuing session of the general assembly until

an appropriation is made by law for the pay-

ment and the judgment is paid.

Therefore, this Court finds and orders that

Raybestos is entitled to post judgment interest at the

rate of 6% per annum from the date of the adjourn-

ment of the next ensuring session of the general

assembly until an appropriation is made by law for

the payment and the judgment is paid.

Indiana citizens deserve to have government

honor the agreements it enters with them. If IDEM is

not required to abide by the agreements it enters,

Indiana’s citizens will have no incentive to enter such

agreements and IDEM’s ability to achieve cleanup of

environmental problems will be substantially im-

paired.

Public policy considerations weigh in favor of

encouraging voluntary cleanup of Indiana’s environ-

mental problems. Citizens like Raybestos should be

encouraged to enter agreements with IDEM for

appropriate cleanup rather than spending time and

money litigating whether they are ultimately respon-

sible. Where disagreements develop during the course

App. 66

of cleanups IDEM can, and should, pursue dispute

resolution through the provisions it includes in its

agreements. While this judgment includes a substan-

tial cost that ultimately is borne by our taxpaéyers,

the damages involved are the consequence of IDEM’s

actions, and all our citizens have an interest in the

government abiding by its promises. Hopefully such

an award will prompt more careful, adherence to

IDEM’s obligations. Sometimes, substantial awards

against public entities are necessary to effect careful

attention to keeping promises; other courts have

awarded such damages in similar cases. E.g.. Entergy

Arkansas, Inc. v. State of Nebraska, 226 F. Supp. 2d

1047, 1161 (D. Neb. 2002) Aff’d 358 F.3d 528 (8th Cir.

2004); reh’g and reh’g en banc denied 366 F.3d 688

(8th Cir. 2004). Ultimately, Indiana’s citizens will

benefit from encouraging responsible action from its

public agencies.

WHEREFORE, the Court finds that Raybestos

has met its burden of proving that IDEM’s breach of

the Agreed Order was at least a substantial cause,

and it is most likely true that it was the direct cause

of EPA’s involvement in the cleanup of Shelly Ditch

and issuance of the Agreed Order. The Court further

finds that Raybestos has proven damages in the

amount of $11,645,321.58, excluding attorney fees

and the Court enters a partial judgment in this

amount. The court sets this matter for hearing on

the issue of the amount of attorney fees incurred and

recoverable by the Plaintiff in relating to the EPA in

the federal enforcement action and over-seeing the

App. 67

implementation and compliance with the Unilateral

Administrative Order on July 7, 2006 at 10:00 a.m.

Raybestos should be awarded post judgment interest

on the judgment amount at the statutory rate of

interest for breach of contract against the State of

Indiana at the rate of 6% per annum from the date of

the adjournment of the next ensuring session of the

general assembly until an appropriation is made by

law for the payment and the judgment is paid.

Dated: June 12, 2006

/s/ Robyn L. Moberly

Honorable Robyn Moberly,

Judge

Marion County Superior Court,

Civil Division 12

Copies to:

George M. Plews (Atty. No. 6274-49)

Brett E. Nelson (Atty. No. 22096-53)

PLEWS SHADLEY RACHER & BRAUN

1346 North Delaware Street

Indianapolis, IN 46202-2415

Telephone: (317) 637-0700

Fax: (317) 637-0710

Timothy J. Junk

Office of the Attorney General

Indiana Government Center South

Fifth Floor

402 W. Washington Street

Indianapolis, IN 46204-2770

Telephone: (317) 232-6247

App. 68

Cindy Shively Klem, N1307

Indiana Department of Environmental Management

Indiana Government Center-North

100 N. Senate Avenue

Indianapolis, IN 46204

App. 69

STATE OF ) IN THE MARION

INDIANA ) sc SUPERIOR COURT

SS:

COUNTY OF) CAUSE NO.

MARION ? 49F12-0101-MI-00194

RAYBESTOS PRODUCTS

COMPANY,

)

Petitioner,

V. )

THE OFFICE OF )

ENVIRONMENTAL )

ADJUDICATION AND THE ?

INDIANA DEPARTMENT .

)

OF ENVIRONMENTAL

MANAGEMENT,

Respondents.

ORDER ON PETITION FOR REVIEW

(Filed Jun. 1, 2001)

Petitioner Raybestos Products Company (“Ray-

bestos”) seeks review of actions’ taken by respondent

the Indiana Department of Environmental Manage-

ment (“IDEM”). Oral argument was held May 9, 2001.

Having considered the timely submitted bnefs and

the arguments of the parties, the Court determines

that Raybestos has been prejudiced by the actions of

IDEM in the manner set forth in Ind. Code § 4-21.5-5-

14(d). Accordingly, pursuant to Ind. Code § 4-21.5-

15(1) this case is remanded to the Office of

Environmental Adjudication for further proceedings

consistent with this decision.

App. 70

I. Findings of Fact

Pursuant to Ind. Code § 4-21.5-5-14(c) and

Indiana Trial Rule 52(A)(2), the Court sets forth the

findings of fact on the material issues on which this

decision is based. Pursuant to Ind. Code § 4-21.5-5-11,

each of the facts set forth herein are confined to the

agency record transmitted to this Court in accordance

with Ind. Code 4-21.5-5-13. Each of these facts were

supported by specific references to the Administrative

Record in Raybestos’ brief. Despite the opportunity to

do so, IDEM has not disagreed with or challenged any

of these facts.

1. In 1996, IDEM alleged that Raybestos Prod-

ucts Company was responsible for the presence of

PCBs in Shelly Ditch near Raybestos’ Crawfordsville

plant. Raybestos entered into an Agreed Order with

the agency by which Raybestos agreed to perform a

risk-based remediation.

2. The Agreed Order required Raybestos to

complete certain sequential steps, obtaining approval

from IDEM for each step. Raybestos was required to

evaluate the extent of the damage, prepare a Risk

Assessment to evaluate the risk posed by the PCBs,

prepare a Technical Memorandum defining cleanup

goals based on the conclusions of the Risk Assess-

ment, and complete the cleanup.

3. Raybestos prepared and submitted its Base-

line Risk Assessment (“Risk Assessment”). The Risk

Assessment concluded that the levels of PCBs

existing in Shelly Ditch posed no adverse health

App. 71

risks. IDEM and its outside consultants analyzed the

Risk Assessment, held meetings with Raybestos’

consultants, and requested and obtained additional

information. After 15 months of analyzing the

document and its conclusions, on March 16, 1998,

IDEM approved Raybestos’ Risk Assessment.

4. Based on the Risk Assessment conclusion

that the PCBs posed no adverse health risk,

Raybestos next submitted its Technical Memoran-

dum. IDEM commented on the proposed Technical

Memorandum, and Raybestos addressed each of

IDEM’s stated concerns, ultimately agreeing to clean

all “hot spots” (high levels) to no more than 238 ppm.

This means the highest levels would have 238 ppm;

levels at other locations would be lower. Raybestos

spent $350,000 in preparing and submitting the

Technicai Memorandum.

5. The IDEM commissioner who signed the

Agreed Order was replaced with a new commissioner,

John Hamilton. A new assistant commissioner, Mary

Beth Tuohy, was brought in from outside the agency

to fill that nonmerit position. Responsibility for

Shelly Ditch, originally in the Project Management

Section, was transferred to Harold Atkinson, an

employee in the Site Investigations Section having

virtually no experience with risk assessments.

6. Commissioner Hamilton issued a press re-

lease criticizing Raybestos for failing to address the

PCBs in Shelley Ditch. The newly appointed Assis-

tant Commissioner Tuohy decided that Raybestos’

App. 72

proposed cleanup level of 238 ppm based on the site

specific Risk Assessment would not be approved. She

believed it would set a bad precedent because she

was not aware of any other sites where IDEM had

approved levels that high. She then instructed her

new project manager, Harold Atkinson, to disapprove

Raybestos’ Technical Memorandum, and because it

was based on the already approved Risk Assessment,

approval of that document had to be “withdrawn.”

7. Atkinson sent notices of IDEM’s “with-

drawal” of approval of the Risk Assessment and dis-

approval of the Technical! Memorandum to Raybestos.

Atkinson’s notices stated that the action was based

upon newly discovered information. In his deposition,

however, he testified that he was simply following

instructions — there was no new information, just the

concern that approval of 238 ppm would set a bad

precedent. The concern that 238 ppm would set a bad

precedent also was the basis of the disapproval of the

Technical Memorandum.

8. After following the Agreed Order’s dispute

resolution provisions, Raybestos timely sought ad-

ministrative review challenging IDEM’s withdrawal

of approval of the Risk Assessment and disapproval of

the Technical Memorandum. At a dispute resolution

meeting, IDEM said it would not reinstate approval

of the Risk Assessment. Raybestos was advised that

no PCBs could be present anywhere in the Ditch at

levels higher than 1-10 ppm.

App. 73

Il. Proceedings in the Office of Environ-

mental Adjudication

1. Raybestos filed its Petition for Administra-

tive Review and Stay of Effectiveness in the Office of

Environmental Adjudication (“OEA”) on December 11,

1998. R. 1-6. Raybestos and IDEM filed cross motions

for partial summary judgment. R. 383-446; R. 319-

382; 124-318. On April 4, 2000, Administrative Law

Judge (“ALJ”) Linda C. Lasley, entered her “Order

Denying Cross Motions for Partial Summary Judg-

ment and Order Scheduling Pre-Hearing Conference.”

R. 13802-1305. On April 25, 2000, the ALJ issued her

“Order Regarding Scheduling and Order Requesting

Briefs,” in which the ALJ sua sponte requested the

parties to submit briefs on four issues. Of significance

here was Issue No. 1 which read:

1. What effect, if any, do the parties believe

paragraph 2 of Section 2 of the Agreed Order

has on these proceedings? In addressing this

issue please consider (a) Ind. Code § 4-21.5-

2-2, (b) paragraph 58 of Section 18 of the

Agreed Order and (c) Petitioner’s Memoran-

dum of Law on Waiver and Construction of

Contracts.

R. 1336.

2. Raybestos and IDEM filed responses to the

April 25, 2000 Order. The parties stipulated that

paragraph 2 of Section 2 of the Agreed Order had no

effect on the proceedings. (Raybestos’ Submission, R.

1350; IDEM’s Submission, R. 1387 (“Raybestos and

App. 74

IDEM stipulate that paragraph 2 of Section 2 of the

Agreed Order has no effect on these proceedings.” )).

3. On June 27, 2000, the ALJ entered her

“Recommended Order Vacating Denial of Cross Mo-

tions for Summary Judgment and Order Recom-

mending Dismissal of Petition for Administrative

Review.” R. 1394-1398. On September 15, 2000, the

Chief Administrative Law Judge, Wayne E. Penrod,

entered his “Final Order Modifying Recommended

Order.” R. 1439-1441. These Orders dismissed Ray-

bestos’ action and held as a matter of law that in

paragraph 2 of Section 2 of the Agreed Order

Raybestos had waived its right to seek review of

IDEM’s actions, and that the agency properly acted

with sound discretion.

4. On October 18, 2000, Raybestos timely filed

its Petition for Judicial Review with this Court. On

December 11, 2000, IDEM filed its Answer.

Ill. Standard of Review

An aggrieved party in an administrative appeal

may seek judicial review. Indiana Department of

Natural Resources v. United Refuse Company, Inc.,

615 N.E.2d 100, 103 (Ind. 1993); Ind. Code §§ 4-21.5-1

through 4-21.5-5-16. The legislature has provided the

following remedies:

If the Court finds that a person has been

prejudiced under Section 14 (I.C. 4-21.5-5-14)

of this Chapter, the Court may set aside an

agency action and:

App. 75

(1) Remand the case to the agency for

further proceedings; or

(2) Compel agency action that has been

unreasonably delayed or unlawfully

withheld.

Ind. Code § 4-21.5-5-15. Relief shall be granted if the

court determines that a person seeking judicial relief

has been prejudiced by an agency action that is:

(1) Arbitrary, capricious, an abuse of dis-

cretion, or otherwise not in accordance with

law;

(2) Contrary to constitutional right, power,

privilege, or immunity;

(3) In excess of statutory jurisdiction,

authority, or imitations, or short of statutory

right;

(4) Without observance of procedure re-

quired by law; or

(5) Unsupported by substantial evidence.

Ind. Code § 4-21.5-5-14(d).

A trial court gives no deference to an agency’s

conclusions of law; any agency determination that is

not in accordance with the law must be set aside.

Indiana Office of Environmentai Adjudication uv.

Kunz, 714 N.E.2d 1190, 1193 (Ind. Ct. App. 1999).

When the facts are undisputed and the question is

whether those facts lead to a particular conclusion, a

question of law is presented and the trial court does

not defer to agency decision-making. Id.

App. 76

IV. Raybestos Did Not Waive Its Right to

Seek Review

Contrary to the rulings of the OFA, section 2 of

Paragraph 2 of the Agreed Order cannot be read as a

waiver of Raybestos’ right to seek review of IDEM’s

actions in breach of the Agreed Order. The intent of

the parties is clear on the face of the document, and

made more clear by the fact that IDEM has never

challenged Raybestos’ right to seek review.

Section XXI of che Agreed Order is entitled

“Reservation of Rights” and paragraph 69 states:

“IDEM and Respondent reserve all rights

and defenses they may have pursuant to any

available legal authority unless expressly

waived herein.”

Under this provision, there can be no implied waiver

of rights. The ALJ mistakenly held in its sua sponte

ruling that Raybestos waived its rights in paragraph

2 of Section 2 of the Agreed Order which provides:

The Respondent agrees to undertake the

actions required by the terms and conditions

of this Order and to waive its right to

administrative review of this Order and

agrees not to contest the jurisdiction of

IDEM to enter into this Order. . .

This is standard language affirming that the re-

spondent will not challenge the entry of the order.

This language is not a waiver of all rights to

administrative review of any subsequent action in

App. 77

breach of the order IDEM might take concerning

Shelly Ditch.

“Waiver is an intentional relinquishment of a

known right involving both knowledge of the

existence of the right and the intention to relinquish

it.” Van de Leuv v. Methodist Hospital of Indiana,

Inc., 642 N.B.2d 531, 533 (Ind. Ct. App. 1994). The

burden to prove waiver is on the party who claims it.

Id. IDEM, the party that would have had the burden

of proof on this issue, did not even raise waiver as a

defense.

On the issue of waiver, there can be no better

evidence of the parties’ intent than their stipulation.

The parties did not intend for Raybestos to waive its

right to seek review of IDEM’s actions in breach of

the Agreed Order. IDEM and Raybestos stipulated

that the language in section 2 of Paragraph 2 of the

Agreed Order had no effect on the proceedings before

the Administrative Law Judge:

Raybestos and IDEM stipulate that para-

graph 2 of Section 2 of the Agreed Order has

no effect on these proceedings.

IDEM’s stipulation that the waiver language of

paragraph 2 of the Agreed Order had no effect on this

proceeding is binding on IDEM. IDEM v. Adapto, Inc.,

717 N.E.2d 646, 651 (Ind. Ct. App. 1999). The

stipulation was also binding on the Administrative

Law Judges. Wittwer v. Wittwer, 545 N.E.2d 27, 29

(Ind. Ct. App. 1989) (“Once a stipulation is entered

App. 78

into between the parties, the facts so stipulated are.

conclusive won both the parties and the tribunal.”).

Raybestos did not waive its right to seek review

of IDEM’s breaches of the Agreed Order. The ruling of

the ALJ to the contrary is erroneous as a matter of

both fact and law.

V. IDEM Lacked Authority Under the Agreed

Order to Withdraw Approval of the Risk

Assessment

IDEM was required under the Agreed Order to

approve or disapprove the Risk Assessment. More

than a year after submittal of the Risk Assessment,

and after written comments and revisions were made,

IDEM approved the Risk Assessment. The Agreed

Order does not permit IDEM to unilaterally “with-

draw” approval later. IDEM has not shown that it

was otherwise authorized to withdraw approval.

IDEM acted contrary to the Agreed Order and

without authority when it withdrew approval of the

Risk Assessment.

VI. The Decision to Withdraw Approval of

the Risk Assessment and Disapprove the

Technical Memorandum was Arbitrary

and Capricious and Unsupported by

Substantial Evidence

After extended review, IDEM approved the Risk

Assessment on March 16, 1998. New IDEM personne!

assigned to the Shelly Ditch project arbitrarily

App. 79

“withdrew” approval of the Risk Assessment,

although there was nothing wrong with the report.

The agency then used the withdrawal of approval as

the basis for disapproving the Technical Memoran-

dum. IDEM personnel have testified, and IDEM does

not dispute, that the withdrawal was based upon a

single consideration having nothing to do with the

specifics of the Risk Assessment: IDEM did not want

to set a “precedent” by allowing the maximum level

proposed by Raybestos. IDEM did not rely on any

site-specific evidence about the Shelly Ditch. Because

the agency’s “actual” reason had nothing to do with

the content of the site-specific Risk Assessment itself,

or the related Technical Memorandum, the decision

to withdraw approval of the Risk Assessment and

disapprove the Technical Memorandum was in

violation of the Agreed Order and was arbitrary and

capricious and must be reversed. The “arbitrary and

capricious” standard has been explained as follows:

Arbitrary and capricious action by an

administrative agency is action taken, in

disregard of the facts or circumstances of the

case, without some basis which would lead a

reasonable and honest person to the same

conclusion.

Indiana Civil Rights Commission v. Sutherland, 182

Ind. App. 133, 145, 394 N.E.2d 949, 957 (1979). IDEM

did not apply the right standard (a site specific

assessment), but applied an arbitrary standard (an

extrapolation from sites not anything like the

Raybestos site). Because IDEM acted arbitrarily, and

App. 80

its decision is not supported by any substantial

evidence, its decisions must be set aside. County

Department of Public Welfare v. Deaconess Hospital,

Inc., 588 N.E.2d 1322, 1326 (Ind. App. 1992).

VII. The Issues Are Not Moot

IDEM has asserted that this case and the issues

presented to this Court are moot. IDEM relies upon a

document purporting to be an Unilateral Adminis-

trative Order (““UAO”) issued by the United States

Environmental Protection Agency. This UAO is not in

the administrative record. The facts relied upon by

IDEM are not supported by affidavit or other admis-

This text is long and has been trimmed here. Open the source document for the complete record.

This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.